UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark one)
[x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND 
     EXCHANGE ACT OF 1934

     For the quarterly period ended June 30, 1998

                                       OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
     EXCHANGE ACT OF 1934

                           Commission File No. 1-12979

                             HomeSide Lending, Inc.
             (Exact name of registrant as specified in its charter)

              Florida                            59-2725415
(State or other jurisdiction of 
 incorporation or organization)      (I.R.S. Employer Identification No.)

                   7301 Baymeadows Way, Jacksonville, FL 32256
               (Address of principal executive offices) (Zip Code)

                                (904) 281-3000
               (Registrant's telephone number, including area code)



Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes _x_ No __



Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

           Class                            Outstanding at August 14, 1998

Common stock $1.00 par value                           100 shares


<PAGE>


                              FINANCIAL INFORMATION

ITEM 1.  Financial Statements


                             HOMESIDE LENDING, INC.
                           CONSOLIDATED BALANCE SHEETS

                    (Dollars in Thousands, Except Share Data)

<TABLE>
<CAPTION>
        
                                                                                     (Unaudited)            Predecessor
                                                                                    June 30, 1998        February 10, 1998
                                                                                    -------------        -----------------        
     <S>                                                                            <C>                  <C>    
      
      ASSETS

      Cash and cash equivalents                                                        $   17,387              $    32,113
      Mortgage loans held for sale, net                                                 1,324,546                1,292,403 
      Mortgage servicing rights, net                                                    1,974,408                1,766,357
      Accounts receivable, net                                                            288,953                  227,294
      Early pool buyout advances                                                          523,139                  374,097
      Premises and equipment, net                                                          36,909                   41,982 
      Goodwill                                                                            696,692                    8,870 
      Other assets                                                                        105,412                  116,175
                                                                                       ----------               ----------        
      Total Assets                                                                     $4,967,446               $3,859,291
                                                                                       ==========               ==========

      LIABILITIES AND STOCKHOLDER'S EQUITY

      Notes payable                                                                    $2,025,400               $2,074,956
      Accounts payable and accrued liabilities                                            224,923                  135,803
      Deferred income taxes                                                               192,163                  197,243
      Long-term debt                                                                    1,186,307                  770,466
                                                                                       ----------               ----------

      Total Liabilities                                                                 3,628,793                3,178,468
                                                                                       ----------               ----------

      Common stock:
           Common stock, $1.00 par value,  10,000 shares  authorized,  100 share
               issued and outstanding, all pledged as second priority                                                             
               collateral on the long-term debt of the Parent                                   -                        -
      Additional paid-in capital                                                        1,322,387                  573,092
                                                                                                                       
      Retained earnings                                                                    16,266                  107,731
                                                                                       ----------               ----------       

      Total Stockholder's Equity                                                        1,338,653                  680,823
                                                                                       ----------               ----------

      Total Liabilities and Stockholder's Equity                                       $4,967,446               $3,859,291
                                                                                       ==========               ==========

The accompanying  notes are an integral part of these financial statements.
</TABLE>

<PAGE>



                             HOMESIDE LENDING, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)

                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                       Predecessor                                 Predecessor
                                                   For the Three       For the Three       For the Period From      For the Six
                                                    Months Ended       Months Ended       February 11, 1998 to     Months Ended
                                                   June 30, 1998       May 31, 1997           June 30, 1998        May 31, 1997
                                                   -------------       ------------       --------------------     ------------ 
                                                                                                        
<S>                                                <C>                 <C>                <C>                       <C>    
                                                                                                   
REVENUES:

Mortgage servicing fees                             $ 117,228            $  98,338            $ 180,814             $ 193,088
Amortization of mortgage servicing rights             (73,765)             (47,494)            (110,742)              (96,873)
                                                    ----------           ----------           ----------            ----------
    Net servicing revenue                              43,463               50,844               70,072                96,215

Interest income                                        39,003               19,242               57,293                40,519
Interest expense                                      (25,940)             (18,062)             (39,569)              (38,479)
                                                    ----------           ----------           ----------            ----------
    Net interest revenue                               13,063                1,180               17,724                 2,040

Net mortgage origination revenue                       34,341               17,926               48,610                40,395
Other income                                            8,783                  777                9,403                   918
                                                    ----------           ----------           ----------            ----------
                                                                         
    Total Revenues                                     99,650               70,727              145,809               139,568
                                                     

EXPENSES:

Salaries and employee benefits                         29,381               19,736               44,011                 39,405
Occupancy and equipment                                 5,006                3,806                7,400                  7,309
Servicing losses on investor-owned loans
   and foreclosure-related expenses                     8,387                4,752               10,210                  9,733
Goodwill amortization                                   8,706                  164               13,576                    316
Other expenses                                         15,246                8,996               23,279                 20,678
                                                    ----------           ----------           ----------             ----------
    Total Expenses                                     66,726               37,454               98,476                 77,441

Income before income taxes                             32,924               33,273               47,333                 62,127
Income tax expense                                     16,236               12,978               23,755                 23,876
                                                    ----------           ----------           ----------             ----------
                                                                                
Net income                                           $ 16,688             $ 20,295             $ 23,578               $ 38,251
                                                    ==========           ==========           ==========             ==========


The accompanying  notes are an integral part of these financial statements.
</TABLE>

<PAGE>



                             HOMESIDE LENDING, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (UNAUDITED)

                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                                 Predecessor                           Predecessor
                                                                For the Three   For the Three   For the Period From    For the Six
                                                                Months Ended    Months Ended    February 11, 1998 to   Months Ended
                                                                June 30, 1998   May 31, 1997        June 30, 1998      May 31, 1997
                                                                -------------   -------------   --------------------   ------------
<S>                                                             <C>             <C>             <C>                    <C>    
                                                                                                         
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:

Net income                                                        $ 16,688         $ 20,295             $ 23,578           $ 38,251
Adjustments to reconcile net income to net cash provided
     by operating activities:
  Amortization of mortgage servicing rights                         73,765           47,494              110,742             96,873
  Depreciation and amortization                                     10,340            1,350               15,948              6,345
  Servicing losses on investor-owned loans                           3,954            3,183                5,147              3,913
  Deferred income tax expense                                       13,527           12,978               21,045             23,876
  Origination and purchase of loans held for sale, net of          273,004           (1,115)             (85,891)           294,840
     repayments
  Change in accounts receivable                                     32,633          (46,235)             (23,829)           (31,378)
  Change in other assets and accounts payable and accrued          (37,123)             (93)              85,301            (7,000)
     liabilities                                                                          
                                                                 ----------       ----------           ----------         ----------
Net cash provided by operating activities                          386,788           37,857              152,041            425,720

CASH FLOWS USED IN INVESTING ACTIVITIES:

Purchase of premises and equipment, net                             (6,081)          (3,763)              (9,963)            (5,338)
Acquisition of mortgage servicing rights                          (137,442)        (120,060)            (299,701)          (251,501)
Net proceeds from (purchases of) risk management contracts         128,930          (29,645)             143,115            (83,151)
Purchases of early pool buyout advances                            (74,230)               -             (149,140)                 -
Acquisition of Banc One Mortgage servicing assets                 (201,000)               -             (201,000)                 -
                                                                 ----------       -----------          ----------         ----------
Net cash used in investing activities                             (289,823)        (153,468)            (516,689)          (339,990)

CASH FLOWS (USED IN)  PROVIDED BY FINANCING ACTIVITIES:

Net borrowings from banks                                         (433,347)        (161,069)             (49,556)          (353,379)
Issuance of notes payable                                          350,000          250,000              410,000            250,000
Payment of debt issue costs                                         (2,807)          (1,687)              (3,015)            (2,918)
Repayment of long term debt                                           (157)            (151)                (195)              (301)
Capital contributions from Parent                                        -                -                    -             47,003
Dividends paid to Parent                                            (7,312)          (7,399)              (7,312)           (10,544)
                                                                 ----------       -----------         ------------        ----------
Net cash (used in) provided by financing activities                (93,623)          79,694               349,922           (70,139)

Net increase (decrease) in cash and cash equivalents                 3,342          (35,917)             (14,726)            15,591
Cash and cash equivalents at beginning of period                    14,045           52,691               32,113              1,183
                                                                 ----------       -----------         ------------        ----------

Cash and cash equivalents at end of period                        $ 17,387         $ 16,774             $ 17,387           $ 16,774
                                                                 ==========       ===========         ============        ==========

Supplemental disclosure of cash flow information:
Interest paid                                                      $27,495          $20,747              $41,000            $38,836
Income taxes paid                                                   $2,657               $2               $2,657                 $2


The accompanying  notes are an integral part of these financial statements.
</TABLE>

<PAGE>



                             HOMESIDE LENDING, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                (UNAUDITED)

1.  BASIS OF PRESENTATION

     The accompanying  consolidated  financial  statements have been prepared in
accordance with generally accepted  accounting  principles for interim financial
information and with the  instructions to Form 10-Q and Rule 10-01 of Regulation
S-X.  Accordingly,  they do not include  all of the  information  and  footnotes
required by generally  accepted  accounting  principles  for complete  financial
statements. In the opinion of management,  all adjustments (consisting of normal
recurring  adjustments)  considered  necessary for a fair presentation have been
included.

     On February  10, 1998,  National  Australia  Bank,  Ltd.  (the  "National")
acquired all outstanding  shares of the common stock of HomeSide  International,
Inc. (the "Parent").  As consideration,  the National paid $27.825 per share for
all of the  outstanding  common  stock and  $17.7  million  cash to  retire  all
outstanding  stock  options.  The total purchase  price was  approximately  $1.2
billion.  The  transaction  was  accounted for as a purchase.  As a result,  all
assets and  liabilities  were  recorded at their fair value on February 11, 1998
and the  purchase  price in excess of the fair value of net assets  acquired  of
$713.6  million was recorded as goodwill.  Following the  transaction  described
above,  the National  now owns 100% of the Parent's  common stock and the Parent
has become an indirect wholly-owned subsidiary of the National.

     As a  result  of the  merger  with the  National,  HomeSide  Lending,  Inc.
("HomeSide  Lending" or the "Company") adopted a fiscal year end of September 30
to  conform  to the  fiscal  year  of  the  National.  Accordingly,  comparative
financial  statements  for the  same  period  in the  prior  year  have not been
presented.  Instead,  a  comparison  of the  period of the prior  year that most
closely  corresponds  to the present  period is  presented.  HomeSide  Lending's
operating  results  are not  directly  comparable  to its  historical  operating
results due, in part, to different  balance  sheet  valuations  (estimated  fair
value as compared to historical cost). In addition,  because HomeSide  Lending's
operating  results are  produced  and managed on a  quarterly  basis,  it is not
practicable  to furnish a period prior to February 11, 1998 that  corresponds to
any period other than the period reported according to the predecessor company's
prior fiscal year periods.

     Operating results for the three months ended June 30, 1998, the period from
February  11, 1998 to June 30, 1998 and the  predecessor's  three and six months
ended May 31, 1997 are not  necessarily  indicative  of the results  that may be
expected  for  the  fiscal  period  ending   September  30,  1998.  For  further
information,  refer  to the  consolidated  financial  statements  and  footnotes
thereto included in the Form 10-K for the fiscal year ended February 10, 1998 of
HomeSide Lending, Inc.

     HomeSide  Lending,  Inc. is one of the  largest  full  service  residential
mortgage banking companies in the United States,  formed through the acquisition
of the mortgage banking  operations of BankBoston,  N.A.,  formerly known as The
First  National  Bank  of  Boston   ("BankBoston")   and  Barnett  Banks,   Inc.
("Barnett").

2.  MORTGAGE SERVICING RIGHTS

The rollforward of mortgage servicing rights is as follows (in thousands):


Balance, February 10, 1998                   $1,766,357
Additions                                       423,945
Deferred hedge gain                            (105,152)
Amortization                                   (110,742)
                                         ----------------
Balance, June 30, 1998                       $1,974,408
                                         ================


3.  NOTES PAYABLE

       HomeSide  Lending  borrows  funds on a demand  basis from an  independent
syndicate of banks under a $2.5 billion credit facility which, at the request of
HomeSide Lending,  may be increased to $3.0 billion.  The line of credit is used
to provide funds for HomeSide Lending's  business of originating,  acquiring and
servicing  mortgage loans.  The line of credit includes both a warehouse  credit
facility,  limited to 98% of the fair value of eligible  mortgage loans held for
sale, and a  servicing-related  facility,  capped at $950.0 million. On February
14,  2000,  the line of credit will  terminate.  The credit  agreement  contains
covenants  that  impose   limitations  and  restrictions  on  HomeSide  Lending,
including the  maintenance  of certain net worth and ratio  requirements.  Under
certain  circumstances set forth in the credit  agreement,  borrowings under the
agreement become  collateralized by HomeSide Lending's assets.  HomeSide Lending
is in compliance with all requirements included in the credit agreement. At June
30, 1998 and  February 10, 1998,  $0.2 billion and $2.1  billion,  respectively,
were outstanding under the credit line. The amounts outstanding at June 30, 1998
under the bank line of credit is  comprised  of a warehouse  credit  facility of
$0.2  billion.  The amount  outstanding  at  February  10,  1998 is made up of a
warehouse  credit  facility  of  $1.2  billion  and a  servicing-related  credit
facility of $0.9 billion.

       Borrowings  under  the bank  line of credit  bear  interest  at rates per
annum,  based on, at HomeSide  Lending's  option (A) the highest of (i) the lead
bank's prime rate,  (ii) the secondary  market rate of  certificates  of deposit
plus 100 basis  points and (iii) the  federal  funds rate in effect from time to
time plus 0.5% or (B)  various  rates based on federal  fund rates.  At June 30,
1998, the weighted  average interest rate on the amounts borrowed under the bank
credit facility was 5.916%,  and the weighted  average  interest rate during the
period from February 11, 1998 to June 30, 1998 was 5.997%.

       On June 23, 1998,  HomeSide  Lending entered into an unsecured  revolving
credit facility with National  Australia Bank pursuant to which it can borrow up
to $2.1  billion,  subject to any  lending  limitations  imposed  by  regulatory
authorities.  As of June 23, 1998, regulations limited the National's ability to
lend funds to HomeSide Lending,  its non-bank  affiliate,  to approximately $1.8
billion.  The interest rates on these  borrowings are equal to 30 day LIBOR.  At
June 30, 1998, total  borrowings from National  Australia Bank were $1.8 billion
with a weighted average interest rate of 5.981%.

4.  LONG-TERM DEBT

      On May 14, 1996,  the Parent  issued  $200.0  million of 11.25% notes (the
"Parent Notes")  maturing on May 15, 2003, and paying  interest  semiannually in
arrears on May 15 and November 15 of each year, commencing on November 15, 1996.
The Parent Notes are redeemable at the option of HomeSide  International,  Inc.,
in whole or in part,  at any time on or after May 15,  2001,  at  certain  fixed
redemption  prices. The indenture contains covenants that impose limitations and
restrictions,   including  the  maintenance  of  certain  net  worth  and  ratio
requirements.  In addition,  the Parent  Notes are secured by a second  priority
pledge of the common stock of HomeSide Lending. The Parent is in compliance with
all net worth and ratio  requirements  included in the indenture relating to the
Parent  Notes.  The Parent used a portion of the  proceeds  from its February 5,
1997  offering of common stock to pre-pay $70.0 million of the Parent Notes at a
premium of $7.9  million.  The  amount  outstanding  at June 30,  1998 is $130.0
million.  The balance of the Parent Notes at June 30, 1998,  including  the fair
value  adjustment  resulting  from the  merger  with the  National,  was  $153.4
million.

        As of June 30, 1998,  outstanding  medium-term  notes issued by HomeSide
Lending under a $1.5 billion shelf  registration  statement  were as follows (in
thousands):

 Issue Date        Outstanding Balance    Coupon Rate     Maturity Date

May 20, 1997          $  250,000            6.875%         May 15, 2000
June 30, 1997            200,000            6.875%         June 30, 2002
June 30, 1997             40,000            6.820%         July 2, 2001
July 1, 1997              15,000            6.860%         July 2, 2001
July 31, 1997            200,000            6.750%         August 1, 2004
September 15, 1997        45,000            6.770%         September 17, 2001
March 19, 1998            60,000           5.6875%         March 20, 2000
April 23, 1998           125,000           5.7875%         April, 24, 2001
May 22, 1998             225,000            6.200%         May 15, 2003
                     ------------
  Total               $1,160,000
                     ============

      As of June  30,  1998,  $850.0  million  of the  outstanding,  fixed  rate
medium-term  notes  had  been  effectively   converted  by  interest  rate  swap
agreements to  floating-rate  notes.  The weighted  average  borrowing  rates on
medium-term  borrowings  issued for the  quarter  ended June 30, 1998 and period
from  February 11, 1998 to June 30, 1998,  including  the effect of the interest
rate swap agreements, was 6.07% and 6.02%,  respectively.  Net proceeds from the
issuances were primarily used to reduce the amounts  outstanding  under the bank
credit  agreement and to fund the Banc One acquisition (see Note 5). The balance
of the medium-term  notes at June 30, 1998,  including the fair value adjustment
resulting from the merger with the National, was $1.2 billion.

        In connection with the acquisition of BancBoston  Mortgage  Corporation,
HomeSide  Lending  assumed a mortgage note payable that is due in 2017 and bears
interest at a stated rate of 9.5%.  HomeSide  Lending's main office  building is
pledged as  collateral  for the mortgage  note  payable.  A purchase  accounting
premium was recorded in connection with HomeSide  Lending  assuming the mortgage
note payable.  The balance of the mortgage  payable at June 30, 1998,  including
the fair value  adjustments  resulting  from the merger with the  National,  was
$24.5 million.


5.  ACQUISITIONS

         On April 1, 1998,  HomeSide Lending entered into an agreement with Banc
One Mortgage  Corporation  ("Banc One") to acquire the mortgage servicing assets
of Banc One.  HomeSide  Lending and Banc One have also  entered into a Preferred
Partner  agreement,  whereby  Banc One will sell a  significant  portion  of its
residential  mortgage  loan  production  to HomeSide  Lending over the next five
years. The total purchase  consideration  for the mortgage  servicing assets was
$201.0 million cash. The mortgage  servicing  rights acquired relate to mortgage
servicing loans of  approximately  $16.6 billion.  The transaction was closed on
June 5, 1998 and was  accounted  for as a purchase.  The excess of the aggregate
purchase  price over the fair  value of net  assets  acquired  was  recorded  as
goodwill and is being amortized over 20 years.

         On April 6, 1998,  the Company  signed an  agreement  with  NationsBank
Corporation  ("NationsBank")  whereby  NationsBank  agreed  to sell  HomeSide  a
national  wholesale  mortgage loan network  which was formerly  owned by Barnett
Banks, Inc. The transaction  closed on May 29, 1998. The excess of the aggregate
purchase  price over the fair  value of net  assets  acquired  was  recorded  as
goodwill and is being amortized over 20 years.


6.   NEW ACCOUNTING STANDARD

      In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting  Statement No. 133, "Accounting for Derivative  Instruments
and  Hedging  Activities."  This  statement   standardizes  the  accounting  for
derivative  instruments  and  hedging  activities  by  requiring  that an entity
recognize  those items as assets or  liabilities  in the  statement of financial
position  and  measure  them at fair  value.  If certain  conditions  are met, a
derivative  instrument  may be  specifically  designated  as (a) a hedge  of the
exposure to changes in the fair value of a recognized asset or liability,  or of
an unrecognized  firm commitment,  (b) a hedge of the exposure to variability in
the cash flows of a recognized  assets,  liability or forecasted  transaction or
(c) a hedge of the foreign currency exposure of an unrecognized firm commitment,
an available-for-sale  security, a forecasted transaction or a net investment in
a foreign  operation.  This statement is effective for fiscal quarters beginning
after  June 15,  1999.  Management  has not yet  determined  the  impact of this
statement on the presentation of the financial statements of HomeSide Lending.


ITEM 2.  Management's Discussion and Analysis of Financial  Condition and 
         Results of Operations

General

      HomeSide Lending is one of the largest full service  residential  mortgage
banking  companies in the United States,  formed through the  acquisition of the
mortgage  banking  operations of BankBoston,  N.A.,  formerly known as The First
National Bank of Boston  ("BankBoston"),  and Barnett Banks,  Inc.  ("Barnett").
HomeSide Lending's strategy  emphasizes  variable cost mortgage  origination and
low cost servicing.  Headquartered  in Jacksonville,  Florida,  HomeSide Lending
ranks as the 5th largest  originator and the 6th largest  servicer in the United
States  for  calendar  year 1997  based on data  published  by  Inside  Mortgage
Finance.

       HomeSide Lending plans to build its core operations  through (i) improved
economies  of  scale in  servicing  costs;  (ii)  increased  productivity  using
proprietary  technology;  and  (iii)  expanded  and  diversified  variable  cost
origination channels. In addition, HomeSide Lending intends to pursue additional
loan portfolio  acquisitions and strategic origination  relationships similar to
the existing BankBoston and Banc One relationships.

      On February 10, 1998,  National  Australia  Bank,  Ltd.  (the  "National")
acquired all outstanding  shares of the common stock of HomeSide  International,
Inc.  As  consideration,  the  National  paid  $27.825  per share for all of the
outstanding  common stock and $17.7 million cash to retire all outstanding stock
options.   The  total  purchase  price  was  approximately  $1.2  billion.   The
transaction  was  accounted  for as a  purchase.  As a result,  all  assets  and
liabilities  were  recorded at their fair value on February  11,  1998,  and the
purchase  price in excess of the fair  value of net  assets  acquired  of $713.6
million was recorded as goodwill. Following the transaction described above, the
National  owns 100% of the  Parent's  common  stock and the Parent has become an
indirect wholly-owned subsidiary of the National.

         As a result of the merger with the National, HomeSide Lending adopted a
fiscal year end of September  30 to conform to the fiscal year of the  National.
Accordingly,  comparative  financial statements for the same period in the prior
year have not been presented.  Instead,  a comparison of the period of the prior
year that most closely corresponds to the present period is presented.  HomeSide
Lending's  operating  results  are not  directly  comparable  to its  historical
operating results due, in part, to different balance sheet valuations (estimated
fair value as  compared to  historical  cost).  In  addition,  because  HomeSide
Lending's operating results are produced and managed on a quarterly basis, it is
not practicable to furnish a period prior to February 11, 1998 that  corresponds
to any period  other than the  periods  reported  according  to the  predecessor
company's prior fiscal year periods.  Therefore,  the prior three and six months
ended  May  31,  1997  have  been  presented  in  accordance   with   Regulation
15d-10(e)(4).

        Operating  results for the three months ended June 30, 1998,  the period
from  February  11, 1998 to June 30,  1998,  and the  predecessor  three and six
months ended May 31, 1997 are not necessarily indicative of the results that may
be  expected  for the  fiscal  year  ending  September  30,  1998.  For  further
information,  refer  to the  consolidated  financial  statements  and  footnotes
thereto included in the Form 10-K for the fiscal year ended February 10, 1998 of
HomeSide Lending.

  Forward-Looking Statements

      The  Private  Securities  Litigation  Reform Act of 1995  provides a "safe
harbor" for certain  forward-looking  statements.  This Quarterly Report on Form
10-Q contains  forward-looking  statements  which reflect the Company's  current
views  with  respect  to  future   events  and  financial   performance.   These
forward-looking  statements  are  subject  to certain  risks and  uncertainties,
including  those  identified  below,  which could cause actual results to differ
materially from historical  results or those  anticipated.  The words "believe,"
"expect,"   "anticipate,"  "intend,"  "estimate"  and  other  expressions  which
indicated future events and trends identify  forward-looking  statements,  which
speak only as of their dates.  The Company  undertakes no obligation to publicly
update or  revise  any  forward-looking  statements  whether  as a result of new
information,  future  events or  otherwise.  The  following  factors could cause
actual  results  to  differ   materially  from   historical   results  or  those
anticipated:  (1) the Company's  ability to grow which depends on its ability to
obtain additional  financing in the future for originating loans,  investment in
servicing  rights,  working capital,  capital  expenditure and general corporate
purposes,   (2)  economic   downturns  may   negatively   affect  the  Company's
profitability  as the  frequency  of loan  default  tends  to  increase  in such
environments  and (3)  changes in  interest  rates may affect the volume of loan
originations and acquisitions,  the interest rate spread on loans held for sale,
the  amount of gain or loss on the sale of loans and the value of the  Company's
servicing  portfolio.  These risks and  uncertainties are more fully detailed in
the Company's filings with the Securities and Exchange Commission.

   Loan Production Activities

      As a multi-channel loan production lender, HomeSide Lending has one of the
industry's largest correspondent lending production  operations,  a full-service
brokered  loan  program and a national  production  center for  consumer  direct
mortgage  lending.  By  focusing on  production  channels  with a variable  cost
structure,   HomeSide  Lending   eliminates  the  fixed  costs  associated  with
traditional  mortgage  branch  offices.  Without  the  burden of high fixed cost
origination  overhead,  HomeSide Lending is well positioned to weather a variety
of interest rate environments.

      The  following   information  regarding  loan  production  activities  for
HomeSide Lending is presented to aid in understanding  the results of operations
and financial  condition of HomeSide Lending for the three months ended June 30,
1998,  the period from  February  11, 1998 to June 30, 1998 and the  predecessor
company's three and six months ended May 31, 1997 (in millions):

<TABLE>
<CAPTION>
                                                                  Predecessor                               Predecessor
                                             For the Three       For the Three       For the Period         For the Six
                                              Months Ended       Months Ended       February 11, 1998       Months Ended
                                             June 30, 1998       May 31, 1997       to June 30, 1998        May 31, 1997
                                             -------------       -------------      -----------------       ------------
<S>                                          <C>                 <C>                <C>                     <C>   
                                                                            
Correspondent                                   $    4,264          $   3,222          $    6,589             $    6,243
Co-issue                                             1,139              1,191               2,627                  3,801
Broker                                                 709                389               1,081                    689
                                               ------------        -----------         -----------           ------------
  Total wholesale                                    6,112              4,802              10,297                 10,733
Direct                                                 255                 69                 352                    203
                                               ------------        -----------         -----------           ------------
  Total production                                   6,367              4,871              10,649                 10,936
Bulk acquisitions                                   17,143                501              17,145                    501
                                               ------------        -----------         -----------           ------------
  Total production and acquisitions              $  23,510          $   5,372           $  27,794              $  11,437
                                               ============        ===========         ===========           ============
</TABLE>

      Total loan production,  excluding bulk acquisitions,  was $6.4 billion for
the  three  months  ended  June  30,  1998  compared  to  $4.9  billion  for the
predecessor three months ended May 31, 1997. Loan production for the period from
February 11, 1998 to June 30 1998,  excluding bulk  acquisitions,  totaled $10.6
billion while loan production for the predecessor six months ended May 31, 1997,
excluding  bulk   acquisitions,   totaled  $10.9  billion.   HomeSide  Lending's
correspondent  lending  and broker  channels  were the primary  contributors  to
production  volume  increases on a quarterly and  annualized  basis.  During the
three months ended June 30, 1998,  HomeSide  Lending  completed  the addition of
Banc One as a Preferred Partner.  As a Preferred  Partner,  Banc One will sell a
significant portion of the residential  mortgage loans it originates to HomeSide
Lending  over the next five years.  HomeSide  Lending  also made bulk  servicing
acquisitions  of $17.1  billion  during the three months ended June 30, 1998 and
the period from  February 11, 1998 to June 30, 1998 compared to $0.5 billion for
the predecessor  three and six months ended May 31, 1997. Bulk  acquisitions for
the three  months  ended June 30, 1998 and the period from  February 11, 1998 to
June 30, 1998 included $16.6 billion from Banc One.

      HomeSide  Lending  continues to examine a number of ways to diversify  and
grow revenue  sources from its existing and new customer  base.  As part of this
effort,  HomeSide  Lending has announced an alliance  with a subprime   mortgage
lender,  which  allows  HomeSide  Lending to offer  additional  mortgage-related
products to the production network.  The subprime  lending unit began operations
in January 1998.

         During the three months ended June 30, 1998,  HomeSide  also  purchased
the  operations of  NationsBank's  subsidiary  Loan America,  a national  broker
network.  This purchase will contribute to HomeSide  Lending's  expansion of its
broker network,  a production channel that is key to HomeSide Lending's variable
cost origination strategy.

   Servicing Portfolio

      Management  believes  that HomeSide  Lending is one of the most  efficient
mortgage  servicers in the industry based on its servicing cost per loan and the
number of loans serviced per employee.  The servicing  operation makes extensive
use  of  state-of-the-art   technology,   process   re-engineering  and  expense
management. With a portfolio size of $115 billion, HomeSide Lending services the
loans of approximately 1.4 million  homeowners from across the United States and
is committed to protecting the value of this important  asset by a sophisticated
risk management strategy. HomeSide Lending anticipates its low cost of servicing
loans will continue to maximize the bottom-line  impact of its growing servicing
portfolio.  HomeSide  Lending's  focus on  efficient  and low cost  processes is
pursued  through  the  selective  use of  automation  as well  as the  strategic
outsourcing   of  selected   servicing   functions  and  effective   control  of
delinquencies and foreclosures.

      The  following  information  on the dollar  amounts of loans  serviced  is
presented  to aid in  understanding  the  results of  operations  and  financial
condition of HomeSide  Lending for the three  months  ended June 30,  1998,  the
period from  February  11, 1998 to June 30, 1998 and the  predecessor  company's
three and six months ended May 31, 1997 (in millions):

<TABLE>
<CAPTION>
                                                                  Predecessor                               Predecessor
                                             For the Three       For the Three       For the Period         For the Six
                                              Months Ended       Months Ended       February 11, 1998       Months Ended
                                             June 30, 1998       May 31, 1997        to June 30, 1998       May 31, 1997
                                             -------------       ------------       -----------------       ------------
<S>                                          <C>                 <C>                <C>                     <C>   
                                                                                    
Balancee at beginning of period                  $  98,882          $  89,218           $  98,906              $  87,713
   Additions                                        23,510              5,372              27,794                 11,437
   Scheduled amortization                              662                499                 982                  1,057
   Prepayments                                       6,310              2,370              10,129                  4,044
   Foreclosures                                        385                171                 514                    312
   Sales of servicing                                  201                 81                 241                  2,268(a)
                                               ------------        -----------         -----------            ------------
       Total reductions                              7,558              3,121              11,866                  7,681
                                               ============        ===========         ===========            ============
Balance at end of period                          $114,834          $  91,469            $114,834              $  91,469
                                               ============        ===========         ===========            ============

(a)  Includes  $1.9  billion of  servicing  sold as part of the sale of Honolulu
Mortgage Company.

</TABLE>

        The number of loans serviced at June 30, 1998 was 1,407,937  compared to
1,105,672 at May 31, 1997.  HomeSide Lending's strategy is to build its mortgage
servicing   portfolio  by   concentrating  on  variable  cost  loan  origination
strategies,  and as a result, benefit from improved economies of scale. A key to
HomeSide Lending's future growth is the proprietary servicing software purchased
from Barnett.  This system will allow  HomeSide  Lending to double the number of
loans  serviced on a single  system.  Over half of the  servicing  portfolio  is
serviced on the proprietary  system. The transfer of the remaining  portfolio is
expected to occur by the end of calendar year 1998.

Results of Operations

For the three  months  ended June 30,  1998  compared to the  predecessor  three
months ended May 31, 1997

   Summary

      HomeSide Lending's net income, excluding goodwill amortization,  increased
24% to $25.4  million for the three months ended June 30, 1998 compared to $20.5
million for the  predecessor  three months ended May 31, 1997.  Net income after
the goodwill  amortization  from the acquisition of HomeSide by the National for
the three months ended June 30, 1998 was $16.7  million.  Total revenues for the
three months ended June 30, 1998 were $99.7  million  compared to $70.7  million
for the  predecessor  three  months  ended May 31,  1997.  The  increases in net
income, excluding goodwill amortization, and revenues for the three months ended
June 30, 1998 compared to the  predecessor  three months ended May 31, 1997 were
primarily  attributable to increases in net mortgage origination revenue and net
interest revenue,  partially offset by a decrease in net servicing revenue.  Net
mortgage  origination  revenue  increased  due to increases  in loan  production
volume and secondary  marketing  gains.  Net interest  revenue  increased due to
increases  in net  interest  earned on  mortgage  loans held for sale and escrow
deposits and as a result of reduced borrowing costs from improved credit ratings
and the issuance of medium-term notes. Net servicing revenue decreased primarily
due to increased mortgage prepayment speeds and amortization expense as a result
of declining  interest rates.  Total expenses increased as a result of increases
in  production  volume,  amortization  expense  of $8.7  million  related to the
goodwill associated with the merger with the National (see Note 1), and expenses
associated with the Banc One acquisition (see Note 5).

    Net Servicing Revenue

      Net  servicing  revenue was $43.5  million for the three months ended June
30, 1998  compared to $50.8 million for the  predecessor  three months ended May
31,  1997.  Net  servicing  revenue is  comprised  of mortgage  servicing  fees,
ancillary servicing revenue, and amortization of mortgage servicing rights.

      Mortgage  servicing fees totaled $117.2 million for the three months ended
June 30, 1998 compared to $98.3 million for the  predecessor  three months ended
May 31, 1997. The servicing  portfolio increased $23.2 billion to $114.8 billion
at June 30, 1998 compared to $91.5  billion at May 31, 1997, a 25%  increase.  A
significant portion of this portfolio growth was due to the purchase of Banc One
Mortgage's $16.6 billion servicing  portfolio during the three months ended June
30, 1998.  HomeSide  Lending's  weighted  average  interest rate of the mortgage
loans in the  servicing  portfolio  was 7.76% and 7.90% at June 30, 1998 and May
31, 1997, respectively.  The weighted average servicing fee, including ancillary
income,  for the servicing  portfolio was 0.450% for the three months ended June
30, 1998 compared to 0.436% for the predecessor three months ended May 31, 1997.
The  increase  in the  weighted  average  servicing  fee  was due to  growth  of
ancillary  revenues  including  late fees and other  mortgage-related  products.
Amortization  expense was $73.8 million for the three months ended June 30, 1998
compared to $47.5 million for the  predecessor  three months ended May 31, 1997.
Amortization expense increased mainly as a result of a higher average balance of
mortgage  servicing rights and a decrease of 79 basis points in average mortgage
interest rates from 8.01% at May 31, 1997 to 7.22% at June 30, 1998.

   Net Interest Revenue

      Net  interest  revenue  is  driven  by the level of  interest  rates,  the
direction in which rates are moving and the spread  between  short and long-term
interest rates.  These factors  influence the size of the  residential  mortgage
origination market,  HomeSide Lending's loan production volumes and the interest
rates HomeSide earns on loans and pays to its lenders.

      Loan refinancing levels are the largest contributor to changes in the size
of the mortgage  origination market. To reduce the cost of their home mortgages,
borrowers  tend to refinance  their loans during  periods of declining  interest
rates, increasing the size of the origination market and HomeSide Lending's loan
production  volumes.  Higher loan  production  volumes  result in higher average
balances  of loans  held for sale and  consequently  higher  levels of  interest
income from interest earned on such loans prior to their sale. This higher level
of interest  income due to increased  volumes is  partially  offset by the lower
rates earned on the loans.

      Overall  borrowing  costs also fluctuate  with changes in interest  rates.
Currently,  the interest expense HomeSide Lending pays to finance mortgage loans
held for sale and other net assets is  generally  calculated  with  reference to
short-term  interest  rates. In addition,  because  mortgage loans held for sale
earn  interest  based on longer term interest  rates,  the level of net interest
revenue  is also  influenced  by the spread  between  long-term  and  short-term
interest rates.

      Net interest revenue totaled $13.1 million for the three months ended June
30, 1998 compared to $1.2 million for the predecessor three months ended May 31,
1997.  Increases in net  interest  revenue were due to increases in net interest
earned on mortgage loans held for sale and escrow deposits.  The average balance
of  mortgage  loans held for sale  increased  30% to $1.3  billion for the three
months  ended June 30, 1998 from $1.0 billion for the  predecessor  three months
ended May 31, 1997. The average escrow  deposits  balance  increased 67% to $2.5
billion  for the three  months  ended June 30,  1998 from $1.5  billion  for the
predecessor  three months ended May 31, 1997. The principal  balances of prepaid
mortgage loans are  accumulated in escrow  accounts  before they are remitted to
investors.  During  periods of declining  interest  rates,  prepayments,  escrow
balances and the related earnings increase. Lower funding rates obtained through
improved credit ratings,  the issue of medium-term  notes and the adoption of an
early pool buyout program also  contributed to increases in net interest income.
HomeSide Lending has issued a total of $1.2 billion of medium-term  notes to the
public market at an average  borrowing  rate of 5.993% as of June 30, 1998.  The
proceeds were used to pay down existing bank debt, increasing HomeSide Lending's
borrowing  capacity.  An immediate benefit of this increased  borrowing capacity
was the initiation of an early pool buyout program,  which involves the purchase
of  delinquent  government  loans from pools early in the  foreclosure  process,
thereby reducing the unreimbursed interest expense that HomeSide Lending incurs.

Net Mortgage Origination Revenue

      Net  mortgage  origination  revenue  is  comprised  of fees  earned on the
origination of mortgage loans,  gains and losses on the sale of loans, gains and
losses resulting from hedging of secondary marketing activities and fees charged
to review loan documents for purchased loan production.

      Net mortgage  origination  revenue was $34.3  million for the three months
ended June 30, 1998 compared to $17.9 million for the  predecessor  three months
ended May 31,  1997,  a 92%  increase.  This  increase  was due to  increases in
HomeSide  Lending's  loan  production  volumes  and an  increase  in gains  from
secondary  marketing  activities.  The declining mortgage interest rates sparked
significant  increases in refinancing  levels and the origination  market.  As a
result, HomeSide Lending's loan production volumes increased,  primarily through
HomeSide  Lending's   correspondent  lending  and  broker  channels.   Secondary
marketing  gains  totaled $12.4 million for the three months ended June 30, 1998
compared to $2.1 million for the predecessor three months ended May 31, 1997.

   Other Income

       Other  income for the three  months  ended June 30, 1998 was $8.8 million
compared to $0.8  million for the  predecessor  three months ended May 31, 1997.
The increase was due to gains on sales of  reinstated  loans from the early pool
buyout program.

   Salaries and Employee Benefits

      Salaries and  employee  benefits  expense was $29.4  million for the three
months ended June 30, 1998 compared to $19.7 million for the  predecessor  three
months ended May 31, 1997. The average number of full-time  equivalent employees
was 2,139 for the three  months  ended June 30,  1998  compared to 1,647 for the
predecessor  three  months  ended May 31,  1997.  The  increases in salaries and
employee benefits expense and average number of full-time  equivalent  employees
are primarily  attributable to additional  expenses and employees to service the
growing  mortgage  servicing   portfolio,   increased  prepayment  activity  and
increased production volume. HomeSide also added servicing employees as a result
of the Banc One  acquisition.  By the fiscal year end, the servicing  operations
acquired  from  Banc  One  are  expected  to be  integrated  into  the  existing
Jacksonville and San Antonio servicing sites.

     Occupancy and Equipment Expense

      Occupancy and equipment expense primarily includes rental expense, repairs
and maintenance  costs,  certain computer  software expenses and depreciation of
HomeSide Lending's  premises and equipment.  Occupancy and equipment expense for
the three months  ended June 30, 1998 was $5.0 million  compared to $3.8 million
for the predecessor three months ended May 31, 1997. The increase in expense was
mainly due to the increase in  information  systems costs required to handle the
growing mortgage servicing portfolio.

   Servicing Losses on Investor-Owned Loans and Foreclosure-Related Expenses

      Servicing  losses on  investor-owned  loans represent  anticipated  losses
primarily  attributable  to  servicing  FHA and VA loans  for  investors.  These
amounts   include   actual   losses   for  the  final   disposition   of  loans,
non-recoverable  foreclosure costs,  accrued interest for which payment has been
curtailed  and  estimates  for  potential  losses  based on  HomeSide  Lending's
experience as a servicer of government loans.

      The  servicing  losses on  investor-owned  loans  and  foreclosure-related
expenses  totaled $8.4 million for the three months ended June 30, 1998 compared
to $4.8  million  for the  predecessor  three  months  ended May 31,  1997.  The
increase was primarily due to an increase in foreclosure-related expenses.

      Included  in the balance of accounts  payable and accrued  liabilities  at
June 30,  1998 is a reserve for  estimated  servicing  losses on  investor-owned
loans of $21.7 million.  The reserve has been  established for potential  losses
related to the  mortgage  servicing  portfolio.  Increases  to the  reserve  are
charged to earnings as servicing losses on investor-owned  loans. The reserve is
decreased  for  actual  losses  incurred  related  to  the  mortgage   servicing
portfolio.  HomeSide Lending's  historical loss experience on VA loans generally
has been consistent with industry experience.  Management believes that HomeSide
Lending has an adequate  level of reserve based on servicing  volume,  portfolio
composition,  credit  quality and  historical  loss rates,  as well as estimated
future losses.



<PAGE>


The following  table sets forth HomeSide  Lending's  delinquency and foreclosure
experience:

                        Servicing Portfolio Delinquencies
                             (percent by loan count)

<TABLE>
<CAPTION>
                                                          At              Predecessor At
                                                     June 30, 1998         May 31, 1997
                                                    ----------------     ----------------
<S>                                                 <C>                  <C>   
Servicing Portfolio Delinquencies, 
     excluding bankruptcies (at end of period)
          30 days                                        3.38%                2.89%
          60 days                                        0.69%                0.63%
          90+ days                                       0.58%                0.46%
                                                      -----------           ----------
               Total past due                            4.65%                3.98%
                                                      ===========           ==========

          Foreclosures pending                           0.75%                0.68%
                                                      ===========           ==========
</TABLE>


         Servicing  losses  on  investor-owned  loans  and   foreclosure-related
expenses  increased  at a rate  disproportionate  to the  increase in  servicing
portfolio  delinquencies as a result of a more mature portfolio at June 30, 1998
compared to the predecessor portfolio at May 31, 1997.

   Other Expenses and Goodwill Amortization

      Other  expenses  consist  mainly  of  professional  fees,   communications
expense,  advertising and public relations, data processing expenses and certain
loan origination expenses.  The level of other expenses fluctuates in part based
upon the level of  HomeSide  Lending's  mortgage  servicing  portfolio  and loan
production volumes.

      Other expenses,  excluding  goodwill  amortization from the acquisition of
HomeSide International,  Inc. by National Australia Bank, were $15.2 million for
the  three  months  ended  June  30,  1998  compared  to  $9.0  million  for the
predecessor  three months ended May 31, 1997. The increase in other expenses was
primarily  due to expenses  associated  with higher  production  volumes and the
growing  mortgage  servicing  portfolio.  Other  expenses,   including  goodwill
amortization  of $8.7  million  and $0.2  million,  respectively,  for the three
months ended June 30, 1998 and the  predecessor  three months ended May 31, 1997
were $23.9 million and $9.2 million, respectively.

   Income Tax Expense

      HomeSide's income tax expense was $16.2 million for the three months ended
June 30, 1998 compared to $13.0 million for the  predecessor  three months ended
May 31, 1997. The effective income tax rates for the three months ended June 30,
1998 and the  predecessor  three  months  ended  May 31,  1997 were 49% and 39%,
respectively. The increase was due to the tax effects of goodwill as a result of
the merger with the National.

Results of Operations

For the  period  from  February  11,  1998  to June  30,  1998  compared  to the
predecessor six months ended May 31, 1997

   Summary

      HomeSide Lending's net income, excluding goodwill amortization,  was $37.2
million for the period from February 11, 1998 to June 30, 1998 compared to $38.6
million for the  predecessor  six months  ended May 31,  1997.  Net income after
goodwill  amortization  from the acquisition of HomeSide by the National for the
period from February 11, 1998 to June 30, 1998 was $23.6 million. Total revenues
for the period from  February  11,  1998 to June 30,  1998 were  $145.8  million
compared  $139.6 million for the  predecessor six months ended May 31, 1997. The
increases in net income and  revenues  for the period from  February 11, 1998 to
June 30, 1998  compared to the  predecessor  six months  ended May 31, 1997 were
primarily  attributable to increases in net mortgage origination revenue and net
interest revenue,  partially offset by a decrease in net servicing revenue.  Net
mortgage  origination  revenue increased due to loan production volume increases
and increases in gains in secondary marketing  activities.  Net interest revenue
increased due to an increase in net interest  earned on mortgage  loans held for
sale and  escrow  deposits  and as a result  of  reduced  borrowing  costs  from
improved  credit  ratings and the issuance of medium-term  notes.  Net servicing
revenue  decreased  primarily due to increased  mortgage  prepayment  speeds and
amortization  expense as a result of declining  interest  rates.  Total expenses
increased   primarily  as  a  result  of  increases  in  production  volume  and
amortization  expense of $13.6 million  related to the goodwill  associated with
the merger with the National (see Note 1) and expenses  associated with the Banc
One acquisition (see Note 5).

   Net Servicing Revenue

      Net  servicing  revenue was $70.1 million for the period from February 11,
1998 to June 30, 1998 compared to $96.2 million for the  predecessor  six months
ended May 31, 1997.  Net  servicing  revenue is comprised of mortgage  servicing
fees,  ancillary  servicing  revenue,  and  amortization  of mortgage  servicing
rights.

      Mortgage  servicing  fees  totaled  $180.8  million  for the  period  from
February  11,  1998  to  June  30,  1998  compared  to  $193.1  million  for the
predecessor  six months ended May 31, 1997.  The servicing  portfolio  increased
$23.4  billion to $114.8  billion at June 30, 1998  compared to $91.5 billion at
May 31, 1997, an 25% increase.  A significant  portion of this portfolio  growth
was due to the purchase of Banc One Mortgage's $16.6 billion servicing portfolio
during the period from February 11, 1998 to June 30, 1998.  HomeSide's  weighted
average interest rate of the mortgage loans in the servicing portfolio was 7.76%
and 7.90% at June 30, 1998 and May 31, 1997, respectively.  The weighted average
servicing  fee,  including  ancillary  income,  for the servicing  portfolio was
0.456% for the period from February 11, 1998 to June 30, 1998 compared to 0.430%
for the  predecessor six months ended May 31, 1997. The increase in the weighted
average  servicing fee was due to growth of ancillary  revenues  including  late
fees and  other  mortgage-related  products.  Amortization  expense  was  $110.7
million for the period from February 11, 1998 to June 30, 1998 compared to $96.9
million for the predecessor six months ended May 31, 1997.  Amortization expense
increased  mainly as a result of a higher average balance of mortgage  servicing
rights and a decrease of 79 basis points in average mortgage interest rates from
8.01% at May 31, 1997 to 7.22% at June 30, 1998.

   Net Interest Revenue

      Net  interest  revenue  is  driven  by the level of  interest  rates,  the
direction in which rates are moving and the spread  between  short and long-term
interest rates.  These factors  influence the size of the  residential  mortgage
origination market,  HomeSide Lending's loan production volumes and the interest
rates HomeSide Lending earns on loans and pays to its lenders.

      Loan refinancing levels are the largest contributor to changes in the size
of the mortgage  origination market. To reduce the cost of their home mortgages,
borrowers  tend to refinance  their loans during  periods of declining  interest
rates, increasing the size of the origination market and HomeSide Lending's loan
production  volumes.  Higher loan  production  volumes  result in higher average
balances  of loans  held for sale and  consequently  higher  levels of  interest
income from interest earned on such loans prior to their sale. This higher level
of interest  income due to increased  volumes is  partially  offset by the lower
rates earned on the loans.

      Overall  borrowing  costs also fluctuate  with changes in interest  rates.
Currently,  the interest expense HomeSide Lending pays to finance mortgage loans
held for sale and other net assets is  generally  calculated  with  reference to
short-term  interest  rates. In addition,  because  mortgage loans held for sale
earn  interest  based on longer term interest  rates,  the level of net interest
revenue  is also  influenced  by the spread  between  long-term  and  short-term
interest rates.

      Net interest  revenue  totaled  $17.7 million for the period from February
11, 1998 to June 30,  1998  compared to $2.0  million  for the  predecessor  six
months  ended  May 31,  1997.  Increases  in net  interest  revenue  were due to
increases  in net  interest  earned on  mortgage  loans held for sale and escrow
deposits.  The principal  balances of prepaid  mortgage loans are accumulated in
escrow  accounts  before  they are  remitted  to  investors.  During  periods of
declining interest rates, prepayments,  escrow balances and the related earnings
increase.  Lower funding rates obtained  through  improved credit  ratings,  the
issue of medium-term notes and the adoption of an early pool buyout program also
contributed to increases in net interest  income.  HomeSide Lending has issued a
total of $1.2 billion of  medium-term  notes to the public  market at an average
borrowing rate of 5.993% as of June 30, 1998. The proceeds were used to pay down
existing  bank  debt,  increasing  HomeSide  Lending's  borrowing  capacity.  An
immediate benefit of this increased  borrowing capacity was the initiation of an
early pool buyout program,  which involves the purchase of delinquent government
loans  from  pools  early  in the  foreclosure  process,  thereby  reducing  the
unreimbursed interest expense that HomeSide Lending incurs.

   Net Mortgage Origination Revenue

      Net  mortgage  origination  revenue  is  comprised  of fees  earned on the
origination of mortgage loans,  gains and losses on the sale of loans, gains and
losses resulting from hedging of secondary marketing activities and fees charged
to review loan documents for purchased loan production.

      Net  mortgage  origination  revenue was $48.6  million for the period from
February 11, 1998 to June 30, 1998 compared to $40.4 million for the predecessor
six months  ended May 31, 1997.  This  increase was due to increases in HomeSide
Lending's loan production volumes,  primarily through its correspondent  lending
and  broker  channels,  and  an  increase  in  gains  from  secondary  marketing
activities.


   Other Income

       Other  income for the period from  February 11, 1998 to June 30, 1998 was
$9.4 million  compared to $0.9 million for the  predecessor six months ended May
31, 1997.  The increase was due to gains on sales of  reinstated  loans from the
early pool buyout program.

   Salaries and Employee Benefits

      Salaries and employee  benefits  expense was $44.0  million for the period
from  February  11,  1998 to June 30,  1998  compared  to $39.4  million for the
predecessor  six months  ended May 31,  1997.  The average  number of  full-time
equivalent employees was 2,070 for the period from February 11, 1998 to June 30,
1998 compared to 1,668 for the  predecessor  six months ended May 31, 1997.  The
increases  in salaries  and  employee  benefits  expense  and average  number of
full-time equivalent employees are primarily attributable to additional expenses
and employees to service the growing  mortgage  servicing  portfolio,  increased
prepayment  activity  and  increased  production  volume.  HomeSide  also  added
servicing employees as a result of the Banc One acquisition.  By the fiscal year
end,  the  servicing  operations  acquired  from  Banc  One are  expected  to be
integrated into the existing Jacksonville and San Antonio servicing sites.

   Occupancy and Equipment Expense

      Occupancy and equipment expense primarily includes rental expense, repairs
and maintenance  costs,  certain computer  software expenses and depreciation of
HomeSide Lending's  premises and equipment.  Occupancy and equipment expense was
$7.4 million for the period from  February 11, 1998 to June 30, 1998 compared to
$7.3 million for the  predecessor six months ended May 31, 1997. The increase in
expense was mainly due to the increase in information  systems costs required to
handle the growing mortgage servicing portfolio.

   Servicing Losses on Investor-Owned Loans and Foreclosure-Related Expenses

      Servicing  losses on  investor-owned  loans represent  anticipated  losses
primarily  attributable  to  servicing  FHA and VA loans  for  investors.  These
amounts   include   actual   losses   for  the  final   disposition   of  loans,
non-recoverable  foreclosure costs,  accrued interest for which payment has been
curtailed  and  estimates  for  potential  losses  based on  HomeSide  Lending's
experience as a servicer of government loans.

      Servicing losses on investor-owned loans and foreclosure-related  expenses
totaled  $10.2  million for the period from  February  11, 1998 to June 30, 1998
compared to $9.7 million for the  predecessor six months ended May 31, 1997. The
increase was primarily due to an increase in foreclosure-related expenses.

      Included  in the balance of accounts  payable and accrued  liabilities  at
June 30,  1998 is a reserve for  estimated  servicing  losses on  investor-owned
loans of $21.7 million.  The reserve has been  established for potential  losses
related to the  mortgage  servicing  portfolio.  Increases  to the  reserve  are
charged to earnings as servicing losses on investor-owned  loans. The reserve is
decreased  for  actual  losses  incurred  related  to  the  mortgage   servicing
portfolio.  HomeSide Lending's  historical loss experience on VA loans generally
has been consistent with industry experience.  Management believes that HomeSide
Lending has an adequate  level of reserve based on servicing  volume,  portfolio
composition,  credit  quality and  historical  loss rates,  as well as estimated
future losses.

The following  table sets forth HomeSide  Lending's  delinquency and foreclosure
experience:

                        Servicing Portfolio Delinquencies
                             (percent by loan count)

<TABLE>
<CAPTION>
                                                         At              Predecessor At
                                                    June 30, 1998         May 31, 1997
                                                   ---------------      ---------------- 
<S>                                                <C>                  <C>    
Servicing Portfolio Delinquencies,
     excluding bankruptcies (at end of period)
          30 days                                       3.38%                2.89%
          60 days                                       0.69%                0.63%
          90+ days                                      0.58%                0.46%
                                                     ----------            ---------
               Total past due                           4.65%                3.98%
                                                     ==========            =========

          Foreclosures pending                          0.75%                0.68%
                                                     ==========            =========
</TABLE>

<PAGE>


         Servicing  losses  on  investor-owned  loans  and   foreclosure-related
expenses  increased  at a rate  disproportionate  to the  increase in  servicing
portfolio  delinquencies as a result of a more mature portfolio at June 30, 1998
compared to the predecessor portfolio at May 31, 1997.

     Other Expenses and Goodwill Amortization

      Other  expenses  consist  mainly  of  professional  fees,   communications
expense,  advertising and public relations, data processing expenses and certain
loan origination expenses.  The level of other expenses fluctuates in part based
upon the level of  HomeSide  Lending's  mortgage  servicing  portfolio  and loan
production volumes.

      Other expenses,  excluding  goodwill  amortization from the acquisition of
HomeSide International,  Inc. by National Australia Bank, were $23.3 million for
the period from February 11, 1998 to June 30, 1998 compared to $20.7 million the
predecessor  six months ended May 31, 1997.  The increase was  primarily  due to
expenses  associated  with  the  growing  mortgage  servicing  portfolio.  Other
expenses,  including  goodwill  amortization  of $13.6 million and $0.3 million,
respectively, for the period from February 11, 1998 to June 30, 1998 and the six
months ended May 31, 1997 were $36.9 million and $21.0 million, respectively.

   Income Tax Expense

      HomeSide  Lending's  income tax expense  was $23.8  million for the period
from  February  11,  1998 to June 30,  1998  compared  to $23.9  million for the
predecessor  six months ended May 31, 1997.  The effective  income tax rates for
the period  from  February  11, 1998 to June 30,  1998 and the  predecessor  six
months ended May 31, 1997 were 50% and 38%,  respectively.  The increase was due
to the tax effects of goodwill as a result of the merger with the National.

Risk Management Activities

     HomeSide  Lending  has a risk  management  program  designed to protect the
economic value of its mortgage servicing portfolio from declines in value due to
increases in estimated loan prepayment speeds, which are primarily influenced by
declines in interest rates. When loans prepay faster than anticipated,  the cash
flow HomeSide  Lending  expects to receive from servicing such loans is reduced.
The value of mortgage servicing rights is based on the present value of the cash
flows to be received over the life of the loan and  therefore,  the value of the
servicing portfolio declines as prepayments increase.

     During the period from February 11, 1998 to June 30, 1998, HomeSide Lending
utilized options on U.S. Treasury bond futures and U.S. Treasury bond futures to
protect a  significant  portion of the market  value of its  mortgage  servicing
portfolio  from a  decline  in  value.  The risk  management  contracts  used by
HomeSide Lending have  characteristics  such that they tend to increase in value
as interest rates decline.  Conversely,  these risk management contracts tend to
decline in value as interest rates rise. Accordingly,  changes in value of these
risk management instruments will tend to move inversely with changes in value of
HomeSide's mortgage servicing rights.

     These risk management  instruments are designated as hedges on the purchase
date and such  designation  is at a level at least as  specific  as the level at
which  mortgage  servicing  rights  are  evaluated  for  impairment.   The  risk
management  instruments  are  marked-to-market  with  changes  in  market  value
deferred  and  applied as an  adjustment  to the basis of the  related  mortgage
servicing  rights asset being hedged.  As a result,  any changes in market value
that are deferred are amortized and evaluated for  impairment in the same manner
as  the  related  mortgage  servicing  rights.  The  effectiveness  of  HomeSide
Lending's hedging activity can be measured by the correlation between changes in
the  value  of the risk  management  instruments  and  changes  in the  value of
HomeSide Lending's mortgage servicing rights.  This correlation is assessed on a
quarterly  basis to ensure that high  correlation is maintained over the term of
the hedging program. If management's ongoing assessment of correlation indicates
that high  correlation is not being achieved,  the Company will  discontinue the
application  of hedge  accounting and recognize a gain or loss to the extent the
hedge  results  have not been  offset by changes  in value of the  hedged  asset
during the hedge  period.  During the periods  presented,  HomeSide  Lending has
experienced  a high  measure  of  correlation  between  changes  in the value of
mortgage servicing rights and the risk management contracts. However, in periods
of rising interest rates,  the increase in values of mortgage  servicing  rights
may outpace the decline in value of the options  included in the hedge position,
because the loss on the options is limited to the premium paid.

     During the period from February 11, 1998 to June 30, 1998,  deferred  gains
and losses on risk management  contracts  resulted in net deferred hedge gain of
$105.2  million.  These gains reduced the carrying  value of mortgage  servicing
rights.  The  decrease in the  estimated  fair value of the  mortgage  servicing
rights approximated the net gains on risk management  contracts for this period.
HomeSide  Lending's future cash needs as they relate to its hedging program will
be  influenced  by such factors as long-term  interest  rates,  loan  production
levels and growth in the mortgage  servicing  portfolio.  The fair value of open
risk management  contracts at June 30, 1998 was $108.1 million,  which was equal
to their  carrying  amount because they are  marked-to-market  at each reporting
date.

Liquidity and Capital Resources

      The  Company's  principal  financing  needs  are  the  financing  of  loan
origination  activities and the investment in mortgage servicing rights. To meet
these  needs,  the  Company  currently  utilizes  funding  from  an  independent
syndicate   of   banks,   including   a   warehouse   credit   facility   and  a
servicing-related  facility,  medium-term  notes and cash flow from  operations.
HomeSide   Lending   continues  to  investigate   and  pursue   alternative  and
supplementary  methods to finance its growing  operations through the public and
private  capital  markets.  These may  include  methods  designed  to expand the
Company's  financial  capacity and reduce its cost of capital.  In addition,  to
facilitate the sale and  distribution  of certain  mortgage  products,  HomeSide
Mortgage  Securities,  Inc., a wholly-owned  subsidiary of HomeSide  Lending may
continue to issue mortgage-backed securities.

      Operations

     Net cash  provided by  operations  for the three months ended June 30, 1998
and the period from  February 11, 1998 to June 30, 1998 were $386.8  million and
$152.0  million,   respectively.   Net  cash  provided  by  operations  for  the
predecessor  three and six  months  ended May 31,  1997 were $37.9  million  and
$425.7  million,  respectively.  The primary uses of cash in operations  were to
fund loan  originations  and pay  corporate  expenses.  These  uses of cash were
offset by cash  provided  from  servicing  fee income,  loan sales and principal
repayments.  Cash  flows  from loan  originations  are  dependent  upon  current
economic  conditions  and the level of long-term  interest  rates.  Decreases in
long-term  interest rates generally result in higher loan refinancing  activity,
which results in higher cash demands to meet increased loan  production  levels.
Higher cash demands to meet increased loan  production  levels are primarily met
through borrowings and loan sales.

      Investing

    Net cash used in  investing  activities  for the three months ended June 30,
1998 and the period from February 11, 1998 to June 30, 1998 were $289.8  million
and $516.7 million,  respectively. Net cash used in investing activities for the
predecessor  three and six months  ended May 31,  1997 were  $153.5  million and
$340.0  million,  respectively.  Cash used in investing  activities  was for the
purchase and  origination  of mortgage  servicing  rights,  the purchase of risk
management contracts and for funding the early pool buyout program. Other assets
increased $45.7 million to $105.4 million at June 30, 1998 from $59.7 million at
May 31, 1997  primarily  as a result of a increase in HomeSide  Lending's  loans
held for investment which include reinstated early pool buyout loans. Early pool
buyout advances totaled $523.1 million at June 30, 1998. Future uses of cash for
investing  activities will be dependent on the mortgage  origination  market and
HomeSide  Lending's hedging needs.  HomeSide Lending is not able to estimate the
timing and amount of cash uses for future acquisitions of other mortgage banking
entities, if such acquisitions were to occur.

       Financing

    Net cash used in financing activities was $93.6 million for the three months
ended June 30,  1998.  Net cash  provided  by  financing  activities  was $349.9
million  for the  period  from  February  11,  1998 to June 30,  1998.  Net cash
provided by financing  activities for the predecessor three months ended May 31,
1997 was $79.7 million. Net cash used in financing activities for the six months
ended May 31,  1997 was $70.1  million.  Cash was  provided  by the  issuance of
medium-term  notes during the periods and used to repay borrowings from banks on
HomeSide Lending's line of credit and pay debt issue costs. In addition,  during
the  predecessor  six  months  ended May 31,  1997,  the  Parent  made a capital
contribution of $47.0 million to HomeSide Lending.

    HomeSide  Lending  expects that to the extent cash generated from operations
is  inadequate  to meet its  liquidity  needs,  those  needs can be met  through
financing  from its bank  credit  facility  and  other  facilities  which may be
entered into from time to time, as well as from the issuance of debt  securities
in  the  public  markets.  Accordingly,  HomeSide  Lending  does  not  currently
anticipate that it will make sales of servicing rights to any significant degree
for the purpose of generating  cash.  Nevertheless,  in addition to its cash and
mortgage loans held for sale balances,  HomeSide Lending's portfolio of mortgage
servicing  rights  provides  a  potential  source  of  funds  to meet  liquidity
requirements,   especially  in  periods  of  rising  interest  rates  when  loan
origination volume slows.  Repurchase  agreements also provide an alternative to
the bank line of credit  for  mortgages  held for sale.  Future  cash  needs are
highly  dependent on future loan  production  and servicing  results,  which are
influenced by changes in long-term interest rates.

Year 2000

General.  HomeSide uses and is dependent  upon a significant  number of computer
software programs and operating  systems to conduct its business.  Such programs
and systems  include those  developed and  maintained by HomeSide,  software and
systems  purchased  from  outside  vendors  and  software  and  systems  used by
HomeSide's third party providers.  HomeSide  recognizes that the Year 2000 issue
is one of  the  most  complex  data  processing  problems  faced  by  businesses
worldwide.  As HomeSide  approaches the century change,  its goal is to maintain
"business as usual."

HomeSide began its Year 2000 efforts in the fall of 1996 with the sponsorship of
its executive  management and guidance of legal counsel. The Year 2000 issue has
been identified as a top priority.  HomeSide has dedicated  resources to assess,
repair and test programs,  applications,  equipment and facilities. HomeSide has
established a Year 2000 Program Office that is  coordinating  with each business
unit throughout the company to ensure Year 2000 compliance.

HomeSide's  strategy  for  addressing  Year 2000  focuses on four  teams,  which
together address all aspects of HomeSide's business.  The Information Technology
team addresses all of the Mainframe, LAN and client server applications. The End
User  Computing (or Business)  team  addresses the business risks within each of
the operating  departments.  The Enterprise  team  addresses the  corporate-wide
risks posed by the Year 2000. Finally,  the Year 2000 Program Office coordinates
HomeSide's Year 2000 readiness  efforts and is responsible  for  communications,
vendor management, project documentation and reporting.

State of  Readiness.  HomeSide's  approach  to Year 2000  compliance  includes a
standard  set of  methods  and tools to  coordinate  and drive  the  project  to
completion. The approach consists of six phases:

 1.   Assessment  - Defining  each  system  and  process to
      determine if there are date  dependencies  and how to
      resolve them.
 2.   Remediation - Implementing the steps identified in the
      assessment  phase to  repair  date  errors.  
 3.   Testing - Developing and  implementing  test scripts to determine if
      remediated code is correct. 
 4.   Implementation - Moving all approved changes from testing into production.
 5.   Check-Off - Formally  acknowledging  that each process has
      been  implemented and is functioning  correctly.  
 6.   Clean Management - Employing procedures and practices to prevent
      the reintroduction of non-compliant applications, products and  processes
      into the operating environment,  once Year 2000 compliance has
      been achieved.

HomeSide's   Information   Technology  and  Business  Teams  have  substantially
completed  a top to bottom  assessment  of the  company's  systems for Year 2000
vulnerability.  The  assessment  has  included  substantially  all  hardware and
software  systems,  embedded  systems,  buildings  and  equipment,  and business
processes.

The Company has  established  certain key  milestones  in its Year 2000 Program.
Those milestones are:

     Assessment of substantially all systems and processes by July 31, 1998;
     Remediation and internal testing of mission critical applications 
          substantially completed by December 31, 1998;  
     End-to-end testing of mission critical systems substantially completed by
          March 31, 1999; and
     Remediation and testing of all systems through 1999.


The  Company  has  substantially  completed  its  assessment  of all systems and
processes.  Remediation  and testing of mission  critical  systems is  underway.
HomeSide is presently "on time" in complying  with the  milestones  and internal
timetable the Company has established for Year 2000 readiness.

HomeSide has relationships with vendors,  customers and other third parties that
rely on software and systems that may not be Year 2000  compliant.  With respect
to  such  third  parties,  Year  2000  compliance  matters  will  not be  within
HomeSide's  direct control.  There can be no assurance that Year 2000 compliance
failures  by such  third  parties  will not have a  material  adverse  effect on
HomeSide's results of operations.

HomeSide is currently  reviewing the year 2000 readiness of its mission critical
vendors,  customers and service  providers.  HomeSide has identified a number of
mission  critical  third  parties  whose year 2000  failure  may  reasonably  be
expected  to  have a  material  adverse  impact  on  the  Company's  results  of
operations.  Examples  of such  third  parties  include  the  Company's  primary
software  vendor,  sole provider of tax payment  services,  and sole provider of
foreclosure services.  Catastrophic failure by any of these parties would have a
material  adverse  effect on the Company.  HomeSide is targeting  these  mission
critical  third parties for  intensive  review and  assessment.  That review and
assessment is ongoing.

Cost of  Year  2000  Efforts.  The  Company  acknowledges  that  some  level  of
modification  or  replacement  of hardware and software is necessary in order to
make HomeSide's  systems "Year 2000  Compliant."  HomeSide  presently  estimates
these remediation costs to total approximately  $15.0 million.  HomeSide expects
to expense  remediation  costs as they are  incurred,  with the exception of new
hardware and software purchases, which will be capitalized.  The Company has not
incurred  significant  remediation  costs prior to June 30, 1998.  The source of
funds for Year 2000 remediation is operating  income of the Company.  The amount
of the Company's  information  technology budget devoted to Year 2000 efforts is
approximately $10.4 million. The Company is unable to readily determine the cost
of replacement of non-compliant  systems that are being replaced in the ordinary
course of business.  No significant  information  technology  projects have been
deferred due to Year 2000 efforts.

Year 2000 remediation costs are based on management's best estimates, which were
derived utilizing numerous  assumptions of future events including the continued
availability  of certain  resources,  third party  modification  plans and other
factors.  However,  there  can be no  guarantee  that  these  estimates  will be
achieved and actual results could differ materially from those plans.

Risks.  HomeSide's risk management  office is actively involved in the company's
Year 2000 Program.  The most reasonably  likely,  worst case Year 2000 scenario,
disregarding the Company's  remediation efforts and contingency  planning,  is a
failure in its loan  servicing  software  and/or  systems.  Such a failure would
result in material  disruption  in the Company's  operations  preventing it from
discharging its contractual obligations to service mortgage loans in an accurate
and timely fashion.  The  consequences of such disruption  could include,  among
other  things,  revocation  of  the  Company's  status  as  an  FHA/VA  approved
lender/servicer and Fannie Mae/Freddie Mac approved  seller/servicer,  incorrect
processing  and/or reporting of payments to consumers and investors,  a material
loss of revenues, and liability to third parties for losses related to servicing
failure.

HomeSide does not presently  anticipate any material Year 2000 failures nor does
HomeSide  anticipate  any material  adverse  impact to its  business,  financial
condition,  or prospects as a result of the Year 2000. The foregoing description
of a worst case Year 2000 scenario is furnished in response to and in compliance
with the Statement of the  Commission  Regarding  Disclosure of Year 2000 Issues
and Consequences by Public Companies, Investment Advisers, Investment Companies,
and Municipal Securities Issuers, Securities Act Rel. No.
33-7448 (July 30, 1998).

Contingency  Planning.  HomeSide's  Year 2000 Program is based on the assumption
that 100% impact coverage is neither feasible nor practical. It is possible that
HomeSide or third parties on which HomeSide  depends may have  unplanned  system
difficulties  during the transition  through 2000, or that third parties may not
successfully  manage  the  change  to  2000.  Therefore,  an  integral  part  of
HomeSide's  Year  2000  Program  is the  development  of  contingency  plans  in
anticipation  of systems or third party  failure.  These  contingency  plans are
being developed for individual applications, systems and business processes. The
Year 2000  Program  Enterprise  team will  review and adjust  existing  business
continuity  planning to incorporate these  circumstances,  and to seek to ensure
that HomeSide meets its primary objective of "business as usual" before,  during
and through 2000.



                           PART II - OTHER INFORMATION

ITEM 1.  Legal Proceedings

      HomeSide Lending is a defendant in a number of legal  proceedings  arising
in the normal course of business.  HomeSide Lending, in management's estimation,
has  recorded  adequate  reserves  in  the  financial   statements  for  pending
litigation.  Management,  after  reviewing all actions and  proceedings  pending
against or involving HomeSide Lending, considers that the aggregate liability or
loss, if any,  resulting  from the final outcome of these  proceedings  will not
have a material effect on the financial position of HomeSide Lending.

      In recent years,  the mortgage  banking industry has been subject to class
action  lawsuits  which  allege   violations  of  federal  and  state  laws  and
regulations,  including the propriety of collecting  and paying various fees and
charges.  Class action  lawsuits may be filed in the future against the mortgage
banking industry.


ITEM 6.  Exhibits and Reports on Form 8-K

    (a) The following documents are filed as a part of this Report:

        Number   Description
        ------   -----------  
         10.1    Asset Purchase Agreement dated April 1, 1998 between HomeSide 
                    Lending, Inc. and Banc One Corporation and Banc One Mortgage
                    Corporation
         10.2    Operating Agreement dated April 1, 1998 between HomeSide 
                    Lending, Inc. and Banc One Corporation and Banc One Mortgage
                    Corporation
         10.3    Unsecured Revolving Credit Agreement and Promissory Note dated 
                    June 23, 1998 between HomeSide Lending, Inc. and National
                    Australia Bank
         12      Computation of the Ratio of Earnings to Fixed Charges
         27      Financial Data Schedule

    (b) Reports on form 8-K

         HomeSide  Lending  filed a report  on Form 8-K,  Item 7,  dated May 15,
1998,  including  Unaudited  Consolidated  Pro Forma  Balance  Sheet and  Income
Statements.  HomeSide  Lending filed a report on form 8-K, Item 5, dated May 15,
1998.



                              SIGNATURES

    Pursuant to the  requirements  of the  Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                              HomeSide Lending, Inc.
                              (Registrant)

Date: August 14, 1998         By:   /s/Joe K. Pickett
                                    -----------------
                                      Joe K. Pickett
                              Chairman and Chief Executive Officer


Date: August 14, 1998         By:  /s/Kevin D. Race
                                   ----------------
                                      Kevin D. Race
                              Executive Vice President, Chief Financial Officer
                                       and Accounting Officer