<PAGE>


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

                                    FORM 10-Q

(Mark one)

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

                For the quarterly period ended December 31, 2001

                                       OR

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

                           Commission File No. 1-12655

                          HOMESIDE INTERNATIONAL, INC.
                          ----------------------------
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                                   <C>
                          DELAWARE                                                 59-3387041
                          --------                                                ----------
(State or other jurisdiction of incorporation or organization)        (I.R.S. Employer Identification No.)
</TABLE>

                   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 Company's classes of
common stock, as of the latest practicable date.

<TABLE>
<CAPTION>
      Title of each class                             Outstanding at February 14, 2002
      -------------------                             --------------------------------
<S>                                                   <C>
Common stock $0.01 par value                                   1.724 shares
Class C non-voting common stock $1.00 par value                none
</TABLE>
<PAGE>
                              FINANCIAL INFORMATION

ITEM 1.  Financial Statements


                          HOMESIDE INTERNATIONAL, INC.
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)
                    (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)


<TABLE>
<CAPTION>
                                                                                DECEMBER 31, 2001    SEPTEMBER 30, 2001
                                                                                -----------------    ------------------
<S>                                                                             <C>                  <C>
ASSETS

Cash and cash equivalents                                                          $   213,693           $   703,439
Mortgage loans held for sale, net                                                    2,115,961             1,845,766
Mortgage servicing rights, net                                                       3,109,322             2,615,225
Risk management instruments at fair value, net                                          63,265               437,758
Early pool buyout advances                                                             225,062                55,595
Accounts receivable, net                                                               408,824               488,918
Premises and equipment, net                                                             79,585                81,811
Other assets                                                                            54,094                49,933
                                                                                   -----------           -----------
Total Assets                                                                       $ 6,269,806           $ 6,278,445
                                                                                   ===========           ===========

LIABILITIES AND STOCKHOLDER'S EQUITY

Accounts payable and accrued liabilities                                           $   617,524           $ 1,020,255
Notes payable                                                                        2,537,898             2,148,000
Long-term debt                                                                       1,814,524             1,821,551
Deferred income taxes, net                                                               3,667                 8,350
                                                                                   -----------           -----------
Total Liabilities                                                                    4,973,613             4,998,156
                                                                                   -----------           -----------

Stockholder's Equity:
Common stock:
    Class A common stock, $.01 par value, 100 shares authorized and 1.724
        shares issued and outstanding                                                       --                    --
    Class C non-voting common stock, $1.00 par value, 195,000 shares
        authorized and 0 shares issued and outstanding                                      --                    --
Additional paid-in capital                                                           3,199,302             3,199,302
Accumulated deficit                                                                 (1,894,797)           (1,902,687)
Accumulated other comprehensive loss                                                    (8,312)              (16,326)
                                                                                   -----------           -----------
Total Stockholder's Equity                                                           1,296,193             1,280,289
                                                                                   -----------           -----------
Total Liabilities and Stockholder's Equity                                         $ 6,269,806           $ 6,278,445
                                                                                   ===========           ===========
</TABLE>


   The accompanying notes are an integral part of these financial statements.


                                       2
<PAGE>
                          HOMESIDE INTERNATIONAL, INC.
           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                                   (UNAUDITED)
                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                              FOR THE THREE MONTHS      FOR THE THREE MONTHS
                                                                            ENDED DECEMBER 31, 2001    ENDED DECEMBER 31, 2000
                                                                            -----------------------    -----------------------
<S>                                                                         <C>                        <C>
REVENUES:

Mortgage servicing fees                                                              $ 221,947                $ 208,198
Amortization of mortgage servicing rights                                             (191,585)                (120,262)
Risk management of mortgage servicing rights                                           601,290                  365,472
Valuation provision of mortgage servicing rights                                      (597,371)                (624,861)
                                                                                     ---------                ---------
    Net servicing revenue (expense)                                                     34,281                 (171,453)

Interest income                                                                         34,518                   28,684
Interest expense                                                                       (26,685)                 (47,881)
                                                                                     ---------                ---------
    Net interest revenue (expense)                                                       7,833                  (19,197)

Net mortgage origination revenue                                                        64,326                   22,623
Other income                                                                             3,897                    5,803
                                                                                     ---------                ---------
    Total Revenues (Expenses)                                                          110,337                 (162,224)

EXPENSES:

Salaries and employee benefits                                                          42,062                   29,879
Occupancy and equipment                                                                 11,555                    9,838
Servicing losses on investor-owned loans and foreclosure-related
expenses                                                                                 5,906                   10,091
Goodwill amortization                                                                       --                    8,785
Other expenses                                                                          18,924                   19,357
                                                                                     ---------                ---------
    Total Expenses                                                                      78,447                   77,950

Income (Loss) before income taxes and cumulative effect of a change in
accounting principle                                                                    31,890                 (240,174)
Income tax expense (benefit)                                                                --                  (84,493)
                                                                                     ---------                ---------

Income (Loss) before cumulative effect of a change in accounting
principle                                                                               31,890                 (155,681)

Cumulative effect of a change in accounting for derivative instruments
and hedging activities, net of income tax expense of $507                                   --                      883
                                                                                     ---------                ---------

Net income (loss)                                                                       31,890                 (154,798)
                                                                                     ---------                ---------
Other comprehensive income, net of tax:
     Cumulative effect of a change in accounting for derivative
     instruments and hedging activities                                                     --                   (9,133)
     Net gains/(losses) on current period cash flow hedges                               8,054                   (2,915)
     Less: reclassification adjustment for losses included in net
     income                                                                                (40)                   9,082
                                                                                     ---------                ---------
Other comprehensive income (loss)                                                        8,014                   (2,966)
                                                                                     ---------                ---------

Comprehensive income (loss)                                                          $  39,904                $(157,764)
                                                                                     =========                =========
</TABLE>


   The accompanying notes are an integral part of these financial statements.


                                       3
<PAGE>
                          HOMESIDE INTERNATIONAL, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (UNAUDITED)
                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                                FOR THE THREE MONTHS     FOR THE THREE MONTHS
                                                                               ENDED DECEMBER 31, 2001  ENDED DECEMBER 31, 2000
                                                                               -----------------------  -----------------------
<S>                                                                            <C>                      <C>
CASH FLOWS  (USED IN) PROVIDED BY OPERATING ACTIVITIES:

Net income (loss)                                                                   $  31,890                $(154,798)
Adjustments to reconcile net income (loss) to net cash (used in)
provided by operating activities:
  Amortization of mortgage servicing rights                                           191,585                  120,262
  Depreciation and amortization                                                         6,070                   12,272
  Cumulative effect of a change in accounting for derivative instruments
  and hedging activities, net                                                              --                     (883)
  Change in fair value of net hedged assets & derivatives                             528,514                 (279,724)
  Change in value of mortgage servicing rights due to hedged risk                  (1,050,361)                      --
  Valuation provision of mortgage servicing rights                                    597,371                  624,861
  Servicing losses on investor-owned loans                                                613                    3,560
  Change in deferred income tax liability                                              (4,684)                 (84,484)
  Origination, purchase and sale of loans held for sale, net of
      repayments                                                                     (321,524)                 125,026
  Change in accounts receivable                                                        79,096                  (13,122)
  Change in other assets and accounts payable and accrued liabilities                (578,330)                  50,782
                                                                                    ---------                ---------
Net cash (used in) provided by operating activities                                  (519,760)                 403,752

CASH FLOWS USED IN INVESTING ACTIVITIES:

Purchase of premises and equipment, net                                                (3,120)                  (6,082)
Acquisition of mortgage servicing rights                                             (232,692)                (437,385)
Net cash (used for) provided from risk management contracts                          (101,460)                  45,605
Net early pool buyout reimbursements                                                    3,012                   14,410
                                                                                    ---------                ---------
Net cash used in investing activities                                                (334,260)                (383,452)

CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:

Net repayments to banks                                                               (95,000)                 (61,400)
Issuance of commercial paper, net of repayments                                       484,898                 (235,000)
Issuance of medium-term notes                                                              --                  250,000
Payment of debt issue costs                                                            (1,544)                  (1,536)
Repayment of long-term debt                                                               (80)                     (79)
Dividends paid to Parent                                                              (24,000)                 (24,000)
                                                                                    ---------                ---------
Net cash provided by (used in) financing activities                                   364,274                  (72,015)

Net decrease in cash and cash equivalents                                            (489,746)                 (51,715)
Cash and cash equivalents at beginning of period                                      703,439                  110,737
                                                                                    ---------                ---------
Cash and cash equivalents at end of period                                          $ 213,693                $  59,022
                                                                                    =========                =========

Supplemental disclosure of cash flow information:
Interest paid                                                                       $  32,652                $  50,818
Income taxes paid                                                                   $   4,690                $       2
Income taxes refunded                                                               $       6                $      14
Impact of cash flow hedges on other comprehensive income, net                       $   8,014                $   2,966
Impact of removal of account provision on early pool buyout advances                $ 172,495                $      --
</TABLE>


   The accompanying notes are an integral part of these financial statements.


                                       4
<PAGE>
                          HOMESIDE INTERNATIONAL, 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 considered necessary
for a fair presentation have been included. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses and the disclosed amounts of
contingent liabilities at the date of the financial statements. Actual results
may differ from those estimates. Certain balances relating to the three months
ended December 31, 2000 may have been reclassed to conform with the
presentation for the three months ended December 31, 2001.

Operating results for the three-month periods ended December 31, 2001 and 2000
are not necessarily indicative of the results that may be expected for the
fiscal year ending September 30, 2002. For further information, refer to the
consolidated financial statements and footnotes thereto included in the Form
10-K for the fiscal year ended September 30, 2001 of HomeSide International,
Inc. (the "Company").

On December 11, 2001, the National announced the sale of HomeSide's operating
platform and certain of its operating assets to Washington Mutual Bank, FA
("WaMu"). As such, WaMu will acquire all of HomeSide's servicing technology, and
other corporate assets including the wholesale, correspondent and consumer
direct production channels and servicing sites in Jacksonville, Florida and San
Antonio, Texas. The Company will retain the mortgage servicing rights asset
("MSR") and related financial hedges. Following the consummation of the
transactions contemplated by the Asset Purchase/Liability Assumption Agreement
with WaMu, HomeSide's servicing portfolio will be subserviced by WaMu. The
transaction is anticipated to close during the first calendar quarter of 2002,
subject to customary closing conditions.

The operations of the Company will change substantially upon the consummation of
the Asset Purchase/Liability Assumption Agreement with WaMu, as described above.
The Company will retain the mortgage servicing rights asset which exists as of
the date of the transaction and continue to receive the servicing fees
associated with the asset, net of subservicing fees which will be distributed to
WaMu. The Company will no longer originate loans for resale. As a result, the
Company would expect retained assets and associated revenues to decline over
time as the loans underlying the mortgage servicing rights asset as of the
transaction date are repaid. The cash flows associated with the mortgage
servicing rights asset will be used to repay the Company's debt obligations and
return capital to the National.


2.    CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash and cash due from banks, interest-bearing
deposits and margin deposits with an original maturity of three months or less.
Margin deposits associated with the risk management program for mortgage
servicing rights and interest rate swaps for debt instruments are maintained
with brokers in accordance with the requirements of International Swap Dealer
Agreements. Margin deposits with counterparties amounted to approximately $167.0
million at December 31, 2001 and $506.7 million at September 30, 2001. The
Company also maintained margin deposits on behalf of counterparties of $97.7
million at December 31, 2001 and $662.3 million at September 30, 2001.


3.    MORTGAGE SERVICING RIGHTS

The change in the balance of mortgage servicing rights was as follows (in
thousands):

<TABLE>
<S>                                              <C>
Balance, September 30, 2001                      $ 2,615,225
Additions                                            232,692
Amortization                                        (191,585)
Change in value due to hedged risk                 1,050,361
Valuation provision                                 (597,371)
                                                 -----------

Balance, December 31, 2001                       $ 3,109,322
                                                 ===========
</TABLE>

Mortgage servicing rights are evaluated for impairment by comparing the carrying
amount of the servicing rights to their fair value, based on discounted
anticipated future net cash flows. At December 31, 2001, the estimated fair
value of the mortgage servicing rights


                                       5
<PAGE>
approximated carrying value. The valuation used the following assumptions: a
weighted-average discount rate of 10.13% and a weighted-average prepayment speed
of 280.

Activity in the valuation reserve for mortgage servicing rights for the three
months ending December 31, 2001 is as follows (in thousands):

<TABLE>
<S>                                       <C>
Balance, September 30, 2001               $2,556,450
Additions                                    597,371
Recoveries                                        --
                                          ----------
Balance, December 31, 2001                $3,153,821
                                          ==========
</TABLE>


4.    RISK MANAGEMENT AND THE ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
      ACTIVITIES

The Company has developed risk management programs and processes designed to
manage market risk associated with the Company's business activities. As more
fully described herein, interest rate risk is a predominant risk that further
influences a number of other business risks such as pricing risk, prepayment
risk, valuation risk, balance sheet management and funding risk. As part of its
risk management programs, the Company utilizes a number of derivative
instruments to manage these risks.

In June of 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133, as amended standardizes the
accounting for derivative instruments and hedging activities and requires that
all derivative instruments be recognized as assets and liabilities at fair
value. If certain conditions are met, "hedge accounting" may be applied and the
derivative instruments may be specifically designated as: (a) a hedge of the
exposure to changes in the fair value of a recognized asset or liability or an
unrecognized firm commitment ("fair value hedge"), (b) a hedge of the exposure
to variability of cash flows of a recognized asset, liability or forecasted
transaction ("cash flow hedge") or (c) a hedge of certain foreign currency
exposures. In the case of a qualifying fair value hedge, changes in the value of
the derivative instruments that have been highly effective are recognized in
current earnings along with the change in value of the designated hedge item. In
the case of a qualifying cash flow hedge, changes in the value of the derivative
instruments that have been highly effective are recognized in other
comprehensive income ("OCI"), until such time that earnings are affected by the
variability of the cash flows of the underlying hedged item. In either a fair
value hedge or a cash flow hedge, net earnings are impacted to the extent the
changes in the value of the derivative instruments do not perfectly offset the
changes in the value of the hedge items (so called "ineffectiveness").
Derivative instruments that are non-designated or do not meet the relevant hedge
accounting criteria are accounted for at fair value with gains and losses
recorded to current earnings. The Company is not a party to any foreign currency
hedge relationships.

The Company adopted SFAS 133 as required during the first quarter of fiscal year
2001. Accordingly, all derivative instruments are recognized on balance sheet at
fair value and are designated either as fair value hedges, cash flow hedges, or
are non-designated pursuant to the Company's risk management policies. At
October 1, 2000, the Company recognized a cumulative-effect transition
adjustment of $1.4 million to increase pre-tax income for the effect of the
change in accounting principle. Additionally, the Company recognized a pre-tax
cumulative-effect transition adjustment to reduce OCI by $14.4 million.

Risk Management of Loan Production Activities

Loan production activities include the origination or acquisition of mortgage
loans, the warehousing of those loans in inventory and the resale of those loans
to investors in the secondary mortgage market. The Company maintains a risk
management program to protect and manage interest rate risk and pricing risk
associated with its mortgage committed pipeline and mortgage inventory. The
Company does not presently originate or acquire loans for investment (portfolio)
purposes.

Mortgage Pipeline:

The Company's mortgage committed pipeline includes interest rate lock
commitments ("IRLCs") that have been extended to borrowers who have applied for
loan funding and meet certain defined credit and underwriting criteria. All of
the Company's IRLCs will be classified as held for sale upon funding of the
underlying loan. Effective with the adoption of SFAS 133, the Company classifies
and accounts for IRLCs as non-designated derivative instruments. Accordingly,
IRLCs are recorded at fair value with changes in value recorded to current
earnings. Risk management derivative contracts used to economically hedge the
IRLCs are also classified and accounted for as non-designated derivatives. In
summary, since a derivative instrument cannot hedge another derivative
instrument (for accounting purposes) the pipeline is effectively accounted for
as a mark-to-market book of business.

The fair value of the Company's IRLCs generally approximate zero at inception
(the lock-in date) since the Company's practice is to extend loan commitments at
market rates of interest and to exclude from its fair value calculation the
normal profit margin associated with the future loan execution. The future loan
execution involves the sale of the loan and, typically, the retention of the
servicing rights. IRLCs have value characteristics that are somewhat analogous
to certain option contracts in that the commitments tend to: (i) decrease in
value at


                                       6
<PAGE>
an accelerating rate as interest rates increase and the probability of the
borrower's loan closing increases, and (ii) increase in value at a decelerating
rate as interest rates decline and the probability of the borrower's loan
closing decreases. The Company manages the interest rate and pricing risks
associated with its IRLCs using mortgage forward delivery contracts, options on
mortgage-backed securities and certain treasury instruments. The Company's risk
management program employs the use of financial modeling to maintain a high
degree of economic correlation between the changes in values of the IRLCs and
the related non-designated hedges. However, due to imprecision in projecting the
timing and rate of loan closings (which are influenced by borrower behavior),
some level of economic ineffectiveness can be expected.

Following is a summary of the net ineffectiveness recognized on non-designated
risk management hedging relationships related to the pipeline at December 31,
2001 and 2000, respectively (in thousands):


<TABLE>
<CAPTION>
                                                                      FOR THE THREE           FOR THE THREE
                                                                       MONTHS ENDED            MONTHS ENDED
                                                                      DECEMBER 31, 2001      DECEMBER 31, 2000
                                                                      ----------------------------------------
<S>                                                                   <C>                    <C>
(Losses)/Gains on IRLCs recognized to income                               $(18,463)               $ 17,692

Gains/(Losses) on mortgage forward delivery contracts                        19,862                 (13,818)
Gains/(Losses) on options contracts                                          17,772                  (1,546)
                                                                      ----------------------------------------
   Total gains/(losses) recognized to income                                 37,634                 (15,364)

Net ineffectiveness recognized on non-designated derivatives               $ 19,171                $  2,328
                                                                      ========================================
</TABLE>


(Losses)/gains on interest rate lock commitments represent decreases/increases
in the value of the commitments from the rate-lock inception date to the loan
funding date (for those commitments that are funded), or to the current
reporting date for those IRLCs that are open at December 31, 2001. The basis of
the IRLCs at the loan funding date, representing cumulative gains or losses on
the IRLCs, is included as a component of the initial cost basis of the loans.
Approximately $19.3 million of the losses recognized on IRLCs (reported for the
three months ended December 31, 2001, above) were applied to the initial basis
of the underlying loans funded and are included in the carrying amount of loans
held for sale at December 31, 2001. The balance of the gains totaling $0.8
million are recognized as open derivative contracts at December 31, 2001 and are
recorded at fair value in the consolidated balance sheets. The net
ineffectiveness of non-designated risk management relationships (related to the
pipeline) is included in net mortgage origination revenue in the accompanying
consolidated statements of income and comprehensive income.

Mortgage Inventory

The Company's mortgage inventory includes closed loans that are held for resale
pending completion of normal post-closing review, collateral document
preparation and other pooling requirements necessary to consummate the sale
and/or securitization. Based on the status of such, as well as historical
delivery patterns and investor settlement dates, the Company is able to forecast
the amount and timing of loan sales. Approximately $1.74 billion of the
Company's loans at December 31, 2001 are conforming loans which have been
underwritten pursuant to the requirements of the secondary marketing agencies,
such as the Federal National Mortgage Association ("FNMA"), the Federal Home
Loan Mortgage Corporation ("FHLMC") or the Government National Mortgage
Association ("GNMA") as appropriate. The Company's risk management program
involves the use of mortgage forward delivery contracts to hedge 100% of its
agency-eligible conforming loans as forecasted loan sales. At December 31, 2001,
$1.74 billion of mortgage forward delivery contracts were designated as cash
flow hedges. At the inception of the hedge, the Company formally documents the
relationship between the forward delivery contracts and the forecasted loan
sales as well as its risk management objective and strategy for undertaking the
hedge transactions. The dollar amount of the forward delivery contracts along
with the underlying rate and terms of the contracts are equivalent to the
forecasted loan sales that are probable of occurring. Hence, the forward
delivery contracts effectively fix the forward sales price and thereby
substantially eliminate interest rate and pricing risk to the Company.

Mortgage loans held for sale at December 31, 2001 include non-conforming loans
aggregating $381.7 million, which will be sold, to non-agency, private
investors. During the three-month period ended December 31, 2001, losses of $2.5
million on non-designated mortgage forward delivery contracts maintained as
economic hedges of non-conforming loans were recorded to earnings and are
included in net mortgage origination revenue in the accompanying consolidated
statements of income and comprehensive income.


                                       7
<PAGE>
The fair values of risk management hedging relationships at December 31, 2001
are as follows (in thousands):


<TABLE>
<S>                                                                   <C>
Mortgage Pipeline:
IRLCs at period end                                                   $    834
Non-designated mortgage forward delivery contracts                      19,862
Options on mortgage-backed securities                                   11,895
                                                                      --------
   Total fair value of pipeline derivatives                             32,591

Mortgage Inventory:
Designated mortgage forward delivery contracts                          (5,256)
Non-designated mortgage forward delivery contracts                       1,038
                                                                      --------
   Total fair value of derivatives related to inventory                 (4,218)


Net asset recorded for fair value derivatives                         $ 28,373
                                                                      ========
</TABLE>


At December 31, 2001, the carrying value of mortgages held for sale approximated
fair value of $2.116 billion. Cumulative losses related to the hedge instruments
in the amount of $5.26 million were recorded in OCI at December 31, 2001 and
will be reclassified to earnings during the next 90 days, concurrent with the
recognition in earnings of the changes in cash flows of the forecasted loans
sales.

Transition Adjustments and Current Period Activity in OCI

As previously discussed, the cumulative effect of the adoption of SFAS 133 was
to increase pre-tax net income by $1.4 million. This amount relates solely to
the mortgage pipeline at October 1, 2000 and represents the net effect of the
adjustments necessary to record IRLCs and the related non-designated derivatives
at fair value.

The pre-tax cumulative-effect transition adjustment to reduce OCI by $14.4
million relates solely to the hedging activities of the mortgage inventory at
October 1, 2000. Specifically, this amount represents the cumulative losses (to
September 30, 2000) of mortgage forward delivery contracts that were off-balance
sheet prior to the adoption of SFAS 133. Such cumulative losses did not exceed
cumulative unrealized gains in the designated mortgage inventory at October 1,
2000. Pursuant to the requirements of SFAS 133, cumulative gains in OCI of $0.04
million, net of tax, were reclassified to earnings during the three months ended
December 31, 2001, concurrent with the recognition of the losses (or unfavorable
variability in cash flows) of the related forecasted loan sales that were
settled. Gains and losses on such hedge relationships are included in net
mortgage origination revenue in the accompanying consolidated statements of
income and comprehensive income.

Activity in OCI related to cash flow hedges of forecasted loan sales is
summarized as follows for the three months ended December 31, 2001 and 2000,
respectively (in thousands):

<TABLE>
<CAPTION>
                                                                                                TAX
                                                                            BEFORE-TAX        (EXPENSE)          NET-OF-TAX
                                                                              AMOUNT         OR BENEFIT            AMOUNT
                                                                          ---------------------------------------------------
<S>                                                                       <C>                <C>               <C>
Balance at September 30, 2000                                               $     --           $    --           $     --
Cumulative effect of a change in accounting for hedging activities           (14,383)            5,250             (9,133)
Net losses on current period cash flow hedges                                 (4,589)            1,674             (2,915)
Reclassification of losses to net income                                      14,302            (5,220)             9,082
                                                                          ---------------------------------------------------
Balance at December 31, 2000                                                $ (4,670)          $ 1,704           $ (2,966)
                                                                          ===================================================


Balance at September 30, 2001                                               $(13,271)          $(3,055)          $(16,326)
Net gains on current period cash flow hedges                                   8,054                --              8,054
Reclassification of gains to net income                                       (3,095)            3,055                (40)
                                                                          ---------------------------------------------------
Balance at December 31, 2001                                                $ (8,312)          $    --          $ (8,312)
                                                                          ===================================================
</TABLE>


                                       8
<PAGE>
Risk Management of Mortgage Servicing Rights

HomeSide utilizes a number of risk management derivative instruments to manage
the interest rate risk associated with its mortgage servicing rights. Such
instruments include interest rate swaps, swaptions and caps, mortgage forward
delivery contracts, options on mortgage-backed securities, and options and
futures on exchange traded Treasury and Eurodollar contracts. Given the unique
value determinants and convexity of mortgage servicing rights, management uses a
combination of derivative instruments to construct a hedge portfolio that is
intended to provide effective protection of the value of the Company's mortgage
servicing rights from interest rate risk.

Pursuant to the requirements of SFAS 133, mortgage servicing rights are
stratified into portfolios of similar assets based on their price sensitivity
such that the mortgage servicing rights in a given portfolio can be expected to
respond in a generally proportionate manner to the expected changes in the total
value of the designated portfolio. The Company uses vendor provided valuation
models to determine the price sensitivity of the mortgage servicing rights for
selected rate shock scenarios such that individual portfolios can be established
and qualify for hedge designation (hereinafter referred to as the "designated
portfolios"). Certain mortgage servicing rights with dissimilar value
determinants and unique convexity profiles may fail to meet the Company's price
sensitivity criteria and are excluded from the portfolios that are designated
for hedging (such portfolios are hereinafter referred to as "non-designated
portfolios").

The Company's risk-management derivative contracts are designated as fair value
hedges of the designated mortgage servicing rights (designated portfolios). As
permitted by SFAS 133, the "hedged risk" is defined at the beginning of the
hedge period and measured as the change in value of the designated portfolios
due to changes in the total value of the mortgage servicing portfolio. At the
inception of each hedge period, the Company formally documents the relationship
between the hedging instruments and the hedged items (representing the
individual designated portfolios described above), as well as its
risk-management objective and strategy for undertaking the hedging
relationships. The Company employs statistical correlation techniques - both at
the inception of the hedge period and on an ongoing basis - to formally assess
its expectation that changes in the value of the derivative contracts will be
highly effective in offsetting changes in the value of the designated hedge
portfolios. In its assessment of hedge effectiveness, the Company excludes the
change in the value of the derivative contracts due to time decay (theta) which
is recorded to current earnings.

HomeSide's risk management program also employs the use of non-designated
derivative contracts that are used to provide a level of economic offset against
the value changes attributable to the non-designated portfolios that do not
qualify for hedge accounting treatment under SFAS 133. Additionally, the Company
is party to certain risk management strategies that are structured to mitigate
yield curve risk and to provide a level of economic offset to the time decay
(theta). These non-designated derivatives are marked-to-market with changes in
value recorded to earnings.

During the first month of the quarter ended December 31, 2001, the Company did
not qualify for hedge accounting pursuant to the requirements of SFAS 133 for
mortgage servicing rights. As a result, for the month of October 2001 the
Company recognized a net gain of $516.5 million to current earnings related to
the change in fair value of its derivative instruments with no corresponding
hedge offset relative to the change in the fair value of the mortgage servicing
rights asset. During the months of November and December 2001, the Company
qualified for hedge accounting and as such its hedging relationships were highly
effective. Accordingly, the decrease in the value of the designated derivative
contracts (net of theta) of $1,015.2 million was recorded to earnings along with
an increase in the value of the designated mortgage servicing rights of $1,050.4
million. Additionally, pursuant to the guidance provided in Statement of
Financial Accounting Standard No. 140, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities" ("SFAS 140"), the
Company recorded a valuation provision totalling $597.4 million for the quarter
ended December 31, 2001.

Risk management results related to mortgage servicing rights for the three
months ended December 31, 2001 are summarized below and are included in the
caption entitled risk management of mortgage servicing rights in the
accompanying consolidated statements of income and comprehensive income (in
thousands):

<TABLE>
<S>                                                                     <C>
Gain on derivative contracts                                            $   516,526

Loss on designated derivative contracts                                  (1,015,172)

Increase in value of designated mortgage servicing rights                 1,050,361
                                                                        -----------
Net hedge ineffectiveness                                                    35,189

Non-designated derivatives and excluded component (time decay)               49,575
                                                                        -----------
Total risk management of mortgage servicing rights                      $   601,290
                                                                        ===========
</TABLE>


                                       9
<PAGE>
The fair value of the Company's derivative instruments used in the risk
management of mortgage servicing rights is as follows at December 31, 2001 (in
thousands):

<TABLE>
<S>                                                                   <C>
Derivatives designated as fair value hedges                           $  31,325

Non-designated derivatives related to non-designated portfolios       $ (29,064)
</TABLE>


Risk Management of Corporate Funding

To meet its funding requirements, the Company periodically issues fixed-rate,
medium-term notes which are converted to floating-rate debt as part of its
Corporate funding strategies. As of the quarter ended December 31, 2001, the
Company had $650 million of fixed-rate, medium term notes that had been swapped
to floating rates of interest with $650 million in notional interest rate swaps.
The Company has designated the interest rate swaps as fair value hedges of the
change in value of the medium-term notes due to LIBOR interest rates. At the
inception of the hedge, the Company formally documents the hedging relationships
between the hedge instruments and the hedged items, as well as the risk
management objectives and strategy for undertaking the hedge transactions. The
medium-term notes are not pre-payable and the key terms of the interest rate
swaps are equivalent to those of the medium-term notes. Accordingly, the Company
expects that changes in the value of the interest rate swaps will offset the
changes in the value of the fixed-rate debt attributable to LIBOR interest
rates. During the quarter ended December 31, 2001, the value of the interest
rate swap contracts decreased by $(6.8) million and offset the changes in the
fair value of the medium-term notes due to the hedge risk. The fair value of
interest rate swap contracts designated as fair value hedges of medium-term
notes was $33.1 million at December 31, 2001.

Termination of Hedging Relationships

The Company employs a number of risk management monitoring procedures to ensure
that the designated hedging relationships are demonstrating, and are expected to
continue to demonstrate, a high level of effectiveness. Hedge accounting is
discontinued on a prospective basis if it is determined that the hedging
relationship is no longer effective or expected to be effective in offsetting
changes in the fair value or cash flows of the hedge item, or if a forecasted
transaction is no longer probable of occurring. When hedge accounting is
discontinued, the Company continues to carry the derivative instruments at fair
value with changes in their value recorded to earnings. However, in the case of
a fair value hedge that is discontinued, the carrying amount of the previously
hedged asset or liability may not be adjusted for changes in their fair value,
except in the case where a decline in fair value creates impairment to the
Company. In the case of a cash flow hedge of a forecasted transaction that is no
longer probable of occurring, gains and losses that were previously accumulated
in other comprehensive income are immediately recognized to earnings. During the
three months ended December 31, 2001, no hedging relationships were terminated.

Fair Value of Derivative Instruments

Derivative Contracts: The fair value of mortgage forward delivery contracts,
options on mortgage-backed securities and exchange traded futures and options on
Treasury and Eurodollar contracts are determined based on market quotes.
Interest rate swaps, swaptions and caps are determined based on discounted
valuation models and are periodically validated against dealer quotes.

Interest Rate Lock Commitments Classified as Derivatives: The fair value of
interest rate lock commitments is determined using a vendor provided valuation
model, which references market quotes of the underlying mortgages. The valuation
model also considers a number of other key value determinants including the
remaining commitment period, the rate of the commitment in relation to current
market rates, interest rate volatility and the probability of the loan closing.
The probability of the loan closing is estimated based on historical
pull-through rates which are stored in matrix detail within the model database
by product type for an established set of interest rate shock scenarios. The
fair value of the Company's IRLCs generally approximate zero at inception (the
lock-in date) since the Company's practice is to extend loan commitments at
market rates of interest and to exclude from its fair value calculation the
normal profit margin associated with the future loan sale transactions.

Other Derivatives: The Company uses certain derivatives to economically hedge
the funding activities associated with government loans that are repurchased out
of GNMA (Government National Mortgage Association) pools that the Company has
previously sold. However, the Company does not designate a hedging relationship
for these derivatives for hedge accounting purposes. Accordingly, net losses on
these derivatives of $0.02 million for the three months ended December 31, 2001,
were recorded to income and were included as a component of risk management
results. These results are included as a component of other income in the
accompanying consolidated statements of income and comprehensive income.


                                       10
<PAGE>
5.    EARLY POOL BUYOUT SALES AND ADVANCES

On November 30, 1998, HomeSide formed a wholly-owned subsidiary, HomeSide
Funding Corporation ("HomeSide Funding"), whose sole purpose is to acquire
delinquent loans from HomeSide's servicing portfolio that are insured by the
Federal Housing Administration or guaranteed by the Department of Veterans
Affairs. The purchases are funded through sales to a trust.

In December 1998, HomeSide entered into a Pooling and Servicing Agreement with
Banc One Trust Company, N.A., as Trustee, and HomeSide Funding, as Transferor,
pursuant to which delinquent mortgage loans were sold to HomeSide Funding.
Subsequently, these loans were securitized and sold to the HomeSide Mortgage
Loan Buyout Trust 1998-A (the "Trust"). During the three months ended December
31, 2001, no delinquent loans were sold to HomeSide Funding. Effective November
29, 2001, the parties to the Pooling and Servicing Agreement agreed that no
additional increases would be made to the outstanding net investment.
Accordingly, no future delinquent loan sales are planned to HomeSide Funding.
The total principal amount of loans outstanding in the Trust as of December 31,
2001 approximated $316.9 million. At December 31, 2001, the Trust had commercial
paper borrowings outstanding of approximately $313.8 million. HomeSide held a
residual interest in loans sold to HomeSide Funding in the amount of $56.9
million and $33.4 million for the three months ended December 31, 2001 and 2000,
respectively. For the three months ended December 31, 2001, fair value was
estimated based on the average recovery periods and other economic factors.

Key economic assumptions used in measuring the fair value of HomeSide's retained
interests at December 31, 2001 and the effect on the fair value of those
retained interests from adverse changes in those assumptions are as follows:


<TABLE>
<CAPTION>
Dollars in thousands                                    DECEMBER 31, 2001
------------------------------------------------------------------------------
<S>                                                     <C>
Fair value of retained interests                             $ 59,614
Weighted-average expected foreclosure related costs              2.77%
Weighted-average discount rate (annual rate)                   2.48 %
      Impact of 10% adverse change                           $   (507)
      Impact of 20% adverse change                           $ (1,391)
Weighted-average recovery period (in months)                     9.68
      Impact of 10% adverse change                           $   (801)
      Impact of 20% adverse change                           $ (1,712)
</TABLE>

The above sensitivities are hypothetical and should be used with caution. As the
amounts indicate, changes in fair value based on variations in assumptions
generally cannot be extrapolated because the relationship of the change in
assumption to the change in fair value may not be linear. Also, in this table,
the effect of a variation in a particular assumption on the fair value of the
retained interest is calculated without changing any other assumption. In
reality, changes in one factor may result in changes in another (for example,
changes in average recovery period could result in changes in discount rates),
which might magnify or counteract the sensitivities.

The following table summarizes cash flows between HomeSide and the
securitization special purpose entity:

<TABLE>
<CAPTION>
                                                    FOR THE THREE MONTHS
Dollars in thousands                              ENDED DECEMBER 31, 2001
-------------------------------------------------------------------------------
<S>                                               <C>
Other cash flows received on retained
interest                                                  $  7,672
</TABLE>


Actual credit losses were $1.70 million and $1.76 million for the three months
ended December 31, 2001 and 2000, respectively.

Early pool buyout advances consist of delinquent government loans in process
of foreclosure that have been purchased from pools. The program reduces the
unreimbursed interest expense that HomeSide incurs. The funding of the
purchases of these delinquent loans for the early pool buyout program is
recorded as interest expense. Interest income earned from the guarantor agency
during the foreclosure process is accrued to match the funding expense
incurred. Scheduled interest payments made to the investor before the loans
were purchased from the pool are recorded as early pool buyout advances with a
reserve for advances which are estimated as being uncollectible.

At December 31, 2001, the early pool buyout advances consist of $33.0 million
in delinquent government loans that have been purchased from pools and $192.1
million representing a conditional option to repurchase certain eligible loans
from investor pools. When certain conditions are met, the Company has the
unilateral right to repurchase certain loans from investor pools which are
subject to the removal of account provisions on defaulted loans required by
SFAS 140. A corresponding $192.1 million liability is included in accounts
payable and accrued liabilities in the accompanying consolidated balance sheets.

6.    NOTES PAYABLE

Notes payable consist of the following (in thousands):


<TABLE>
<CAPTION>
                                                                             WEIGHTED AVERAGE INTEREST RATE
                                                        TOTAL            ----------------------------------
                                                     OUTSTANDING         AT PERIOD END    DURING THE PERIOD
                                                     -----------         -------------    -----------------
<S>                                                  <C>                 <C>              <C>
December 31, 2001:
Commercial Paper                                     $  884,898               2.55%            2.74%
National Australia Bank Unsecured Facility            1,653,000               2.03%            2.68%
                                                     ----------
  Total                                              $2,537,898
                                                     ==========
</TABLE>


                                       11
<PAGE>
<TABLE>
<S>                                                  <C>                      <C>              <C>
September 30, 2001:
Commercial Paper                                     $  400,000               3.53%            5.06%
National Australia Bank Unsecured Facility            1,748,000               3.46%            5.22%
                                                     ----------
  Total                                              $2,148,000
                                                     ==========
</TABLE>


HomeSide has an established commercial paper program, which is supported by an
independent syndicate of banks under a credit facility. On December 18, 2001,
HomeSide entered into a new back-up facility for $920 million led by JP Morgan
Chase Bank (the "Chase Facility"). This agreement replaced HomeSide's previous
bank credit facility and is scheduled to terminate on December 17, 2002. Upon
consummation of the transactions contemplated by the Asset Purchase/Liability
Assumption Agreement (the "Asset Purchase Agreement") dated as of December 11,
2001 with WaMu, it is anticipated that this credit facility will be terminated.
Borrowings under the credit facility bear interest at rates per annum, based on,
at HomeSide's option, (i) the Eurodollar rate plus an applicable margin, (ii)
the greater of the federal funds rate plus an applicable margin or the prime
rate, (iii) in the case of swingline loans, the federal funds rate plus an
applicable margin, or (iv) in the case of competitive bid loans, the lowest
competitive Eurodollar or fixed rate submitted by a bidding lender. The credit
agreement contains covenants that impose limitations and restrictions on
HomeSide, including requirements to maintain certain net worth and ratio
requirements. The primary purpose of this credit facility is to provide
liquidity back up for HomeSide's commercial paper program. The outstanding
commercial paper reduces available borrowings under the credit facility. At
December 31, 2001, there were no amounts outstanding under the credit facility
and HomeSide was in compliance with all requirements included in the credit
agreement.

On July 31, 2001, HomeSide entered into an agreement for an unsecured revolving
credit facility with the National, which agreement replaced a previous unsecured
revolving credit facility with the National initially established on June 23,
1998 and thereafter renewed on an annual basis. Under the new credit facility,
HomeSide can borrow up to $2.42 billion through and including January 30, 2002,
and up to $1.92 billion from January 31, 2002 through July 30, 2002, subject to
limits imposed by regulatory authorities. Borrowings under the credit facility
may be overnight or for periods of 7, 30, 60 or 90 days. For overnight
borrowings, the interest rate is determined by the National at the time of the
borrowing. For borrowings other than overnight, the interest rate is charged at
the corresponding LIBOR rate of the maturity period. This facility is
cross-defaulted to the Chase Facility.


7.    LONG-TERM DEBT

Medium-term notes

As of December 31, 2001, the outstanding medium-term notes issued by HomeSide
Lending under its shelf registration statement were as follows (in thousands):


<TABLE>
<CAPTION>
    ISSUE DATE             OUTSTANDING BALANCE        COUPON RATE       MATURITY DATE
<S>                        <C>                        <C>               <C>
June 30, 1997                   $  200,000               6.88%          June 30, 2002
July 31, 1997                      200,000               6.75%          August 1, 2004
May 22, 1998                       225,000               6.20%          May 15, 2003
June 9, 2000                       215,000               7.07% *        June 10, 2002
June 9, 2000                       200,000               6.89% *        April 9, 2002
June 9, 2000                        85,000               7.07% *        June 10, 2002
August 1, 2000                      75,000               6.97% *        August 1, 2002
September 14, 2000                  75,000               6.79% *        September 16, 2002
September 14, 2000                  60,000               6.94% *        September 15, 2003
September 14, 2000                  25,000               7.00%          September 16, 2002
September 15, 2000                 100,000               6.79% *        September 16, 2002
September 15, 2000                  50,000               6.86% *        September 16,2002
December 4, 2000                   125,000               6.98% *        December 4, 2002
December 4, 2000                    75,000               6.98% *        December 4, 2002
December 4, 2000                    50,000               6.87% *        December 4, 2002
                                ----------
  Total                         $1,760,000
                                ==========
</TABLE>

* Represents initial interest rate for floating rate note

As of December 31, 2001, the outstanding, fixed rate medium-term notes of $650.0
million had been effectively converted by interest rate swap agreements to
floating-rate notes. During the quarter ended December 31, 2001, the value of
the interest rate swap contracts


                                       12
<PAGE>
decreased by $6.8 million and offset the changes in the fair value of the
medium-term notes due to hedged risk. The fair value of the interest rate swap
contracts designated as fair value hedges of medium-term notes was $33.1 million
at December 31, 2001. (See Note 4.) The weighted average borrowing rates on
medium-term borrowings issued for the three-month period ended December 31,
2001, including the effect of the interest rate swap agreements, was 3.12%. Net
proceeds from the issuances were primarily used to reduce the amounts
outstanding under the bank credit agreement and to fund acquisitions of
servicing rights.

Mortgage note payable

In connection with the acquisition of BancBoston Mortgage Corporation, HomeSide
assumed a mortgage note payable that is due in 2017 and bears interest at a
stated rate of 9.5%. HomeSide's main office building is pledged as collateral
for the mortgage note payable. The balance of the mortgage payable at December
31, 2001, including the fair value adjustments resulting from the merger with
the National, was $21.4 million.


8.    NEW ACCOUNTING STANDARDS

In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets"
("SFAS 142") which supercedes APB Opinion No. 17, Intangible Assets. This
statement addresses how intangible assets should be accounted for in financial
statements upon their acquisition and also how they should be accounted for
after they have been initially recognized in the financial statements. The
provisions of this statement are required to be applied starting with fiscal
years beginning after December 15, 2001. Early application is permitted for
entities with fiscal years beginning after March 15, 2001, provided that the
first interim financial statements have not been previously issued. This
statement is required to be applied at the beginning of an entity's fiscal year
and to be applied to all goodwill and other intangible assets reported in its
financial statements. Management does not expect the requirements of this
standard to have a significant impact on the financial statements.

In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 143, "Accounting for Asset Retirement
Obligations" ("SFAS 143"), which addresses financial accounting and reporting
for obligations associated with the retirement of tangible long-lived assets and
for the associated retirement costs. The statement applies to all entities and
covers legal obligations (arising from laws, statutes, contracts, etc.) that an
entity must satisfy when disposing of tangible, long-lived assets. SFAS 143
doesn't apply to a lessee's obligations that are considered minimum lease
payments or contingent rentals. In addition, obligations that arise solely from
a plan to dispose of a long-lived asset in accordance with SFAS 121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of", are not covered by the provisions of SFAS 143. The standard requires
entities to record the fair value of a liability for an asset retirement
obligation in the period in which it is incurred. When the liability is
initially recorded, the entity capitalizes a cost by increasing the carrying
amount of the related long-lived asset. Over time, the liability is accreted to
its present value each period, and the capitalized cost is depreciated over the
useful life of the related asset. Upon settlement of the liability, an entity
either settles the obligation for its recorded amount or incurs a gain or loss
upon settlement. The standard is effective for fiscal years beginning after June
15, 2002. Management does not expect the adoption of this statement to have a
material impact on the financial statements.

In August, 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" ("SFAS 144") which supersedes SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" and provides a single accounting model for the disposal of
long-lived assets. Although retaining many of the fundamental recognition and
measurement provisions of SFAS 121, the new rules also supersede the provisions
of APB Opinion No. 30, "Reporting the Results of Operations-Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions", with regard to reporting the
effects of a disposal of a segment of a business and required future operating
losses from discontinued operations to be displayed in discontinued operations
in the period(s) in which the losses are incurred. This Statement also amends
ARB No. 51, "Consolidated Financial Statements", to eliminate the exception to
consolidation for a subsidiary for which control is likely to be temporary. SFAS
144 is effective for fiscal years beginning after December 15, 2001. Management
does not expect the requirements of this standard to have a significant impact
on the financial statements.


9.    DIVIDENDS

On November 13, 2001 the Company paid dividends to the National in the amount of
$24.0 million.


10.   SUBSEQUENT EVENT

On January 31, 2002, the Company extinguished the mortgage note payable for
which the main office building was pledged as collateral. The Company recognized
a $4.2 million after tax gain on the early extinguishment of debt.


                                       13
<PAGE>
ITEM 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

General

HomeSide International, Inc. (the "Company" or "HomeSide"), through its wholly
owned operating subsidiary, HomeSide Lending, Inc. ("HomeSide Lending), is one
of the largest full service residential mortgage banking companies in the United
States. The Company is the successor to HomeSide, Inc. (HomeSide, Inc.
Predecessor"). On February 10, 1998, National Australia Bank Limited (the
"National") acquired all outstanding shares of the common stock of HomeSide,
Inc. and the Company adopted a fiscal year end of September 30 to conform to the
fiscal year of the National. HomeSide, Inc. Predecessor was formed through the
acquisition of the mortgage banking operations of BankBoston, N.A. ("BBMC
Predecessor" to HomeSide, Inc. Predecessor) on March 16, 1996 and subsequently
purchased the mortgage banking operations of Barnett Banks, Inc.

HomeSide is currently headquartered in Jacksonville, Florida, and at December
31, 2001 ranks as the 7th largest mortgage servicer and the 10th largest
mortgage loan originator in the United States based on data published by Inside
Mortgage Finance. On December 11, 2001, the National announced the sale of
HomeSide's operating platform and certain of its operating assets to WaMu. As
such, WaMu will acquire all of HomeSide's servicing technology, and other
corporate assets including the wholesale, correspondent and consumer direct
production channels and servicing sites in Jacksonville, Florida and San
Antonio, Texas. The Company will retain the mortgage servicing rights asset
("MSR") and related financial hedges. Following the consummation of the
transactions contemplated by the Asset Purchase Agreement with WaMu, HomeSide's
servicing portfolio will be subserviced by WaMu. The transaction is anticipated
to close during the first calendar quarter of 2002, subject to customary closing
conditions.

Operating results for the three-month periods ended December 31, 2001 and 2000
are not necessarily indicative of the results that may be expected for the
fiscal year ending September 30, 2002. For further information, refer to the
consolidated financial statements and footnotes thereto included in the Form
10-K for the fiscal year ended September 30, 2001 of HomeSide International,
Inc.

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 indicate 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 operations of the Company will change substantially
upon the consummation of the Asset Purchase Agreement with WaMu, as described
above. The Company will retain the mortgage servicing rights asset which exists
as of the date of the transaction and continue to receive the servicing fees
associated with the asset, net of subservicing fees which will be distributed to
WaMu. The Company will no longer originate loans for resale. As a result, the
Company would expect retained assets and associated revenues to decline over
time as the loans underlying the mortgage servicing rights asset as of the
transaction date are repaid. The cash flows associated with the mortgage
servicing rights asset will be used to repay the Company's debt obligations and
return capital to the National. Should the transaction with WaMu, as described
above, not be consummated, 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

HomeSide participates in several origination channels, including wholesale
origination (correspondent, co-issue, and broker) and direct origination
(HomeSide Solutions) channels. The direct channels include internet,
telemarketing, direct mail, and mortgages related to affinity group and
co-branding partnerships. HomeSide has also purchased servicing rights in bulk
from time to time. Historically, HomeSide's strategy has been to customarily
sell all loans that it originates or purchases while retaining the servicing
rights to such loans. This multi-channel production base provides access to and
flexibility among production channels in a wide variety of market and economic
conditions. By focusing on production channels with a variable cost structure,
HomeSide minimizes the fixed costs associated with traditional mortgage branch
offices. Upon consummation of the Asset Purchase Agreement with WaMu, the
Company will no longer participate in loan origination through any channels. As
a result, the Company would expect revenues and expenses associated with loan
origination activities to cease.


                                       14
<PAGE>
The following information regarding loan production activities for HomeSide is
presented to aid in understanding the results of operations and financial
condition of HomeSide for the three-month periods ended December 31, 2001 and
2000 (in millions):

<TABLE>
<CAPTION>
                                             FOR THE THREE          FOR THE THREE
                                              MONTHS ENDED           MONTHS ENDED
                                            DECEMBER 31, 2001      DECEMBER 31, 2000
                                            -----------------      -----------------
<S>                                         <C>                    <C>
            Correspondent                        $ 5,196               $ 2,774
            Co-issue                               5,261                 3,150
            Broker                                 1,728                   722
                                                 -------               -------
              Total wholesale                     12,185                 6,646
            Direct                                   982                   231
                                                 -------               -------
              Total production                    13,167                 6,877
            Bulk acquisitions                         --                13,196
                                                 -------               -------
              Total production and
                Acquisitions                     $13,167               $20,073
                                                 =======               =======
</TABLE>


Total loan production, excluding bulk acquisitions, was $13.2 billion for the
three months ended December 31, 2001 compared to $6.8 billion for the three
months ended December 31, 2000, a 94% increase. The increase was a function of
HomeSide's ability to leverage origination alliances, technological enhancements
and influences from a more favorable interest rate environment. When interest
rates decline, the size of the mortgage origination market increases as home
ownership becomes more affordable and as existing mortgagors refinance their
loans. Refinances were 65% of HomeSide's production volume for the quarter ended
December 31, 2001, compared to 27% for the quarter ended December 31, 2000.

Economies of scale are vital to the long-term viability of mortgage servicing
and are increasingly important to remain competitive in the industry. Although
HomeSide did not close on any bulk acquisitions during the quarter, the Company
continued to participate in growth opportunities through its Preferred
Partnership program. Preferred partnerships generally include a bulk servicing
acquisition and an ongoing mortgage origination flow. HomeSide services loans on
a priority basis on behalf of its Preferred Partners and offers the customer
mortgage-related products. Preferred Partner relationships contributed 19% of
HomeSide's production volume for the three months ended December 31, 2001.

Servicing Portfolio

Management believes that HomeSide is one of the most efficient mortgage loan
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.
HomeSide'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.
With a portfolio size of $181.3 billion, HomeSide services the loans of
approximately 2.0 million homeowners from across the United States and endeavors
to protect the value of this important asset by a sophisticated risk management
strategy. At December 31, 2001, HomeSide was ranked the seventh largest servicer
in the United States, with approximately 3.14% market share of the $5.8 trillion
single family mortgages outstanding, according to Inside Mortgage Finance.

Upon consummation of the Asset Purchase Agreement, WaMu will acquire all of the
Company's servicing technology. The Company will retain the mortgage servicing
rights asset that exists as of the transaction date and will continue to receive
the servicing fees associated with the asset, net of subservicing fees which
will be distributed to WaMu. As a result, the Company would expect the mortgage
servicing rights asset and associated revenues to decline over time as the loans
underlying the asset are repaid. The Company will no longer originate loans for
resale.

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 for the three-month periods ended December 31, 2001 and 2000 (in
millions):

<TABLE>
<CAPTION>
                                                     FOR THE THREE            FOR THE THREE
                                                      MONTHS ENDED             MONTHS ENDED
                                                    DECEMBER 31, 2001        DECEMBER 31, 2000
                                                    -----------------        -----------------
<S>                                                 <C>                      <C>
            Balance at beginning of  period               $187,367               $173,310
               Additions, net                               13,123                 20,053
               Scheduled amortization                        1,443                  1,196
               Prepayments                                  17,518                  4,407
               Foreclosures                                    262                    208
                                                          --------               --------
                   Total reductions                         19,223                  5,811
                                                          --------               --------
            Balance at end of period                      $181,267               $187,552
                                                          ========               ========
</TABLE>


                                       15
<PAGE>
During the three months ended December 31, 2001, the average long-term mortgage
rate, based on the FNMA 30-year commitment rate, declined 118 basis points as
compared to the three months ended December 31, 2000. As a result, the decrease
in mortgage interest rates resulted in an increase in prepayments as refinancing
activity rose.

The number of loans serviced at December 31, 2001 was 1,977,957 compared to
2,098,711 at December 30, 2000.


RESULTS OF OPERATIONS

FOR THE THREE MONTHS ENDED DECEMBER 31, 2001 COMPARED TO THE THREE MONTHS ENDED
DECEMBER 31, 2000

Summary

Upon consummation of the Asset Purchase Agreement with WaMu, the operations of
the Company will change substantially. WaMu will obtain all of the Company's
servicing technology along with certain operating assets and the Company will
retain the mortgage servicing rights asset that exists as of the date of the
transaction. The Company will continue to receive servicing fees associated with
the asset, net of subservicing fees which will be distributed to WaMu. The
Company will no longer participate in loan origination. As a result, the Company
would anticipate net revenues associated with loan origination activities to
cease. The Company would also expect retained assets and associated revenues to
decline over time as the loans underlying the mortgage servicing rights asset in
existence as of the transaction date are repaid.

HomeSide reported net income of $31.9 million for the three months ended
December 31, 2001 compared to a net loss of ($154.8) million for the three
months ended December 31, 2000, as restated. Total revenues (expenses) for the
three months ended December 31, 2001 were $110.3 million compared to ($162.2)
million for the three months ended December 31, 2000, an 168% increase. Net
servicing revenue (expense) increased $205.7 million for the three months ended
December 31, 2001 compared to the three months ended December 31, 2000,
primarily due to the impact of risk management of mortgage servicing rights
results recognized in earnings. Net interest revenue (expense) increased
primarily due to the widening of the spread between short-term and long-term
interest rates. Net mortgage origination revenue increased due to higher
production volumes and earnings resulting from the risk management of loan
production activities. Total expenses remained relatively flat. Income tax
benefit decreased primarily as a result of an increase in income (loss) before
income taxes and adjustments to the valuation allowance against certain
deferred tax assets of the Company.

Net Servicing Revenue (Expense)

Net servicing revenue (expense) is comprised of mortgage servicing fees net of
guaranty fees, ancillary servicing revenue, amortization of mortgage servicing
rights, valuation provision related to the mortgage servicing rights asset, and
the net earnings impact of risk management of mortgage servicing rights.
Mortgage servicing rights are the rights to receive a portion of the interest
coupon and fees collected from the mortgagor for performing specified servicing
activities. The total cost of loans originated or acquired is allocated between
the mortgage servicing rights and the mortgage loans, without the servicing
rights, based on relative fair values. The value of servicing rights acquired
through bulk acquisitions is capitalized at cost.

Mortgage servicing rights are amortized in proportion to and over the period of
the estimated net servicing revenue. Mortgage servicing rights are evaluated for
impairment by comparing the carrying amount of the servicing rights to their
estimated fair value. Fair value is estimated based on discounted future net
cash flows considering market prepayment estimates, historical prepayment rates,
portfolio characteristics, interest rates and other economic factors. For
purposes of measuring impairment, the mortgage servicing rights are stratified
by the predominant risk characteristics which include product types of the
underlying loans and interest rates of mortgage notes. Impairment, if any, is
recognized through a valuation reserve for each impaired stratum.

Mortgage servicing fees increased 7% to $221.9 million for the three months
ended December 31, 2001 compared to $208.2 million for the three months ended
December 30, 2000, primarily a result of the average portfolio growth. For the
three months ended December 31, 2001, the average servicing portfolio increased
by $6.0 billion to $184.5 billion compared to $178.5 billion at December 31,
2000, a 3% increase. HomeSide's weighted average interest rates of the mortgage
loans in the servicing portfolio for the three-month period were 7.42% and 7.59%
at December 31, 2001 and 2000, respectively. The weighted average servicing fee,
net of guaranty fees and including ancillary income, for the servicing portfolio
was 48.1 basis points for the three months ended December 31, 2001 compared to
46.6 basis points for the three months ended December 31, 2000.

Amortization expense was $191.6 million for the three months ended December 31,
2001 compared to $120.3 million for the three months ended December 31, 2000, a
59% increase. Amortization expense increased primarily as a result of increased
prepayment speeds associated with declining mortgage interest rates.
Amortization charges are highly dependent upon the level of prepayments during
the period and changes in prepayment expectations, which are significantly
influenced by the direction and level of long-term interest rate movements. A
decrease in mortgage interest rates results in an increase in prepayment
estimates used in calculating periodic amortization


                                       16
<PAGE>
expense. Because mortgage servicing rights are amortized over the expected
period of service fee revenues, an increase in mortgage prepayment activity
typically results in a shorter estimated life of the mortgage servicing assets
and, accordingly, higher amortization expense.

During the first month of the quarter ended December 31, 2001, the Company did
not qualify for hedge accounting pursuant to the requirements of SFAS 133 for
mortgage servicing rights. As a result, for the month of October 2001 the
Company recognized a net gain of $516.5 million to current earnings related to
the change in fair value of its derivative instruments with no corresponding
hedge offset relative to the change in the fair value of the mortgage servicing
rights asset. During the months of November and December 2001, the Company
qualified for hedge accounting and as such its hedging relationships were highly
effective. Accordingly, the decrease in the value of the designated derivative
contracts (net of theta) of $1,015.2 million was recorded to earnings along with
an increase in the value of the designated mortgage servicing rights of $1,050.4
million. Additionally, pursuant to the guidance provided in Statement of
Financial Accounting Standard No. 140, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities" ("SFAS 140"), the
Company recorded a valuation provision totaling $597.4 million for the quarter
ended December 31, 2001.

Net Interest Revenue (Expense)

Net interest revenue (expense) is driven by the level of interest rates, the
direction in which rates are moving, the associated spread between short- and
long-term interest rates and the rates at which HomeSide is able to borrow, and
the growth in net assets. These factors influence the size of the residential
mortgage origination market, HomeSide's loan production volumes, the interest
income HomeSide earns on its mortgages held for sale and interest rates paid to
its lenders. These factors also influence risk management results that affect
funding requirements.

Loan refinancing levels are the largest contributors to changes in the size of
the mortgage origination market. As interest rates decline, more borrowers
refinance their mortgages, resulting in an increase in the mortgage origination
market. Higher loan production volume results in higher average balances of
mortgages 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 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 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 (expense) resulted in net revenue of $7.8 million, an
increase of $27.0 million compared to net expense of ($19.2) million for the
three months ended December 31, 2000. The increase in net interest revenue was
partially due to a widening of the spread between short-term and long-term
rates. During the three months ended December 31, 2001, the spread between
average long-term mortgage rates and short-term LIBOR rates widened by 327 basis
points as compared to the three months ended December 31, 2000.

Net Mortgage Origination Revenue

Net mortgage origination revenue is comprised of fees earned on the origination
of mortgage loans, fees charged to review loan documents for purchased loan
production, risk management hedge results, and gains and losses on the sale of
loans.

Net mortgage origination revenue was $64.3 million for the three months ended
December 31, 2001 compared to $22.6 million for the three months ended December
31, 2000, an 184% increase. This increase was primarily a result of gains
recognized in relation to the risk management of loan production activities, see
the section below titled Risk Management of Loan Production Activities for
additional detail. Also contributing to this increase in income were higher
production volumes resulting from the factors previously discussed above in the
Loan Production Activities section.

Other Income

Other income decreased 33% to $3.9 million for the three months ended December
31, 2001 compared to $5.8 million for the three months ended December 31, 2000.
Other Income was higher for the three months ended December 31, 2000 primarily
due to a sale-leaseback transaction involving HomeSide's San Antonio facility,
which resulted in the immediate recognition of a $4.5 million gain. In addition,
a deferred gain of $7.3 million was recorded and is amortized over the life of
the lease.


                                       17
<PAGE>
Salaries and Employee Benefits

Salaries and employee benefits expense was $42.1 million for the three months
ended December 31, 2001 compared to $29.9 million for the three months ended
December 31, 2000, a 41% increase. The average number of full-time equivalent
employees was 2,716 for the three months ended December 31, 2001 compared to
2,361 for the three months ended December 31, 2000. The increase is attributable
to higher prepayment activity, higher total production volumes (excluding bulk
acquisitions) resulting in higher commissions, incentives and an increase in
temporary and overtime staff.

Occupancy and Equipment

Occupancy and equipment expense primarily includes rental expense, repairs and
maintenance costs, certain computer software expenses and depreciation of
HomeSide's premises and equipment. Occupancy and equipment expense for the three
months ended December 31, 2001 was $11.6 million compared to $9.8 million for
the three months ended December 31, 2000, a 17% increase. The increase in
expense was mainly due to increased expenses incurred for maintenance and
depreciation relating to enhancements for processing systems and technology
upgrades performed in the previous fiscal year.

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 final disposition of loans, non-recoverable foreclosure costs,
accrued interest for which payment has been denied and estimates for potential
losses based on HomeSide's experience as a servicer of government loans.

The servicing losses on investor-owned loans and foreclosure-related expenses
totaled $5.9 million compared to $10.1 million for the three months ended
December 31, 2000. The decrease was mainly attributable to a decline in per unit
serving losses resulting from a shift in the geographic mix and composition of
the servicing portfolio.

Included in the balance of accounts payable and accrued liabilities at December
31, 2001 is a reserve for estimated servicing losses on investor-owned loans of
$13.3 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's historical loss experience on VA loans generally has been consistent
with industry experience. Management believes that HomeSide 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's delinquency and foreclosure
experience:

                        SERVICING PORTFOLIO DELINQUENCIES
                             (PERCENT BY LOAN COUNT)

<TABLE>
<CAPTION>
                                                       DECEMBER 31,    DECEMBER 31,
                                                           2001            2000
                                                           ----            ----
<S>                                                    <C>             <C>
Servicing Portfolio Delinquencies, excluding
bankruptcies (at end of period)
          30 days                                          3.55%           3.56%
          60 days                                          0.79%           0.70%
          90+ days                                         0.48%           0.57%
                                                           ----            ----
               Total past due                              4.82%           4.83%
                                                           ====            ====
          Foreclosures pending                             0.79%           0.51%
                                                           ====            ====
</TABLE>


Goodwill Amortization

For the three months ended December 31, 2001, no goodwill amortization was
recorded. In September 2001, management of the Company determined that the
carrying value of goodwill and other intangible assets exceeded its recoverable
amount, based on an estimated market sale value of the Company. As a result, the
Company recorded an impairment charge of $579.8 million to write-off the
goodwill and $10.2 million to write-off other intangible assets. Goodwill
amortization was $8.8 million for the three months ended December 31, 2000.

Other Expenses

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's mortgage servicing portfolio and loan production
volumes.


                                       18
<PAGE>
Other expenses of $18.9 million for the three months ended December 31, 2001 was
relatively flat compared to $19.4 million for the three months ended December
31, 2000.

Income Tax Benefit

The Company's income tax expense (benefit) was $0.0 for the three months ended
December 31, 2001, compared to an income tax benefit of $84.5 million for the
three months ended December 31, 2000. Income tax benefit decreased primarily as
a result of an increase in income (loss) before income taxes and adjustments to
the valuation allowance against certain deferred tax assets of the Company.

Management has previously determined that it is more likely that not that
certain deferred tax assets will not be realized. Accordingly, a valuation
allowance was established in prior periods.

For the quarter ended December 31, 2001, expected income tax expense,
including the effect of state taxes was offset by adjustments to the valuation
allowance. Accordingly, no provision for income tax expense (benefit) has been
recorded for the quarter ended December 31, 2001. Management continues to
maintain a valuation allowance against certain deferred tax assets of the
Company.

RISK MANAGEMENT ACTIVITIES

Mortgage banking entities face a broad range of risk that must be proactively
managed to achieve success in the industry. The Company utilizes an
enterprise-wide risk management structure that is comprised of a common policy
framework and a set of controls that are utilized to achieve standardization of
risks. Each business function is responsible for using standardized risk
assessment templates along with best practice methodology for the identification
and quantification of the particular risk it is exposed to and for the
implementation of appropriate policies and procedures.

The Company's Risk Council, comprising executive and senior management as well
as representation from internal audit, is the principal operating risk policy
decision making body within the Company. Risk Council's role is to constantly
monitor and assess the Company's risk profile in existing and future business
operations, and to assist business units in the design and implementation of
appropriate risk management policies and strategies.

The Risk Council provides direction and oversight for many types of risks such
as credit, operations, legislative compliance, e-commerce, business continuity
and disaster recovery. Certain of the Company's other major risk areas (e.g.
market risk) are more fully discussed below.

Risk Management of Market Risk

Market risk recognizes the potential change in the value of assets, liabilities
and other financial commitments as a result of changes in asset prices along
with changes in actual and projected interest rates. HomeSide continues to
review and enhance its strategies and underlying policies relating to risk
management of market risk based on changes in the market environment. Certain
members of the Company's Risk Council also comprise the Company's Asset and
Liability Management Committee ("ALCO") which, under delegated authority from
the Board, sets policies in relation to the management of market risk, corporate
funding and balance sheet management. Representatives of the Company's ALCO
report to the National's ALCO concerning risk management and also participate in
the National's group ALCO meetings.

In accordance with SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities", for the three-month period ended December 31, 2001, all of
the Company's risk management derivative instruments are recorded at fair value.
Changes in the value of risk management derivative instruments designated as
qualifying fair value hedging relationships are recognized in current earnings
along with the changes in the value of the qualifying hedged assets or
liabilities. Changes in the value of risk management derivative instruments
designated as qualifying cash flow hedging relationships of forecasted loan sale
transactions are recorded to other comprehensive income ("OCI") and reclassified
to earnings concurrent with settlement of the loan sale transactions. The
accounting policies relevant to derivative instruments and hedging activities
for each of the Company's key risk management areas are more fully discussed in
Note 4 to the Consolidated Financial Statements.

Market Environment

The market environment during the quarter ended December 31, 2001 was volatile.
In response to the slowing US economy, the Federal Reserve lowered interest
rates on three occasions during the quarter resulting in a decline in short-term
interest rates of 76 basis points. Conversely, after falling significantly
through early November 2001, mortgage interest rates began to rise during the
quarter resulting in an increase in long-term interest rates of 52 basis points
between September 30, 2001 and December 31, 2001, as based on the FNMA 30-year
commitment rate.

Despite the sluggish economy, the US housing sector has remained strong.
Purchase volumes have been solid and refinancing activities have hit levels not
seen since mid-1998. This has resulted in increased production volumes and
improved results in the Company's production channels. However, the volatile
interest rate environment and extensive refinancing activities have resulted in
higher prepayment activity impacting the value of the Company's mortgage
servicing right asset.

Continued uncertainties surrounding future monetary policy and the state of the
US economy have resulted in significant volatility in interest rate spreads
between short and long term rates, placing considerable pressure on the
Company's hedge performance. As more fully

                                       19
<PAGE>
discussed in Note 4 of the Consolidated Financial Statements, HomeSide utilized
a combination of derivative instruments to create a hedge portfolio that is
intended to provide effective protection of the value of the Company's mortgage
servicing rights from interest rate risk.

Following is a summary of risk management activities and results for the three
months ended December 31, 2001:

Risk Management of Loan Production Activities

The Company maintains a risk management program to protect and manage interest
rate risk and pricing risk associated with its mortgage commitment pipeline and
mortgage inventory. In the normal course of business, the Company extends
interest rate lock commitments ("IRLCs" or "commitments") to borrowers who apply
for loan funding and meet certain credit and underwriting criteria. IRLCs in the
mortgage pipeline expose the Company to interest rate and pricing risk. In a
rising rate environment, the aggregate value of the Company's commitments tends
to decrease in value and, generally, at an accelerating rate. In a declining
rate environment, the value of the Company's commitments tends to increase in
value. However, the rate of increase in the value tends to decelerate as the
likelihood of the borrower closing on the loan decreases if market rates decline
by a meaningful amount versus the borrower's committed rate. As part of its risk
management processes, the Company has devoted substantial resources and modeling
solutions to enable management to project the expected percent of IRLCs that
will ultimately fund under different interest rate scenarios (referred to as
"pull-through rates"). The success of the Company's risk management strategies
relies on proactive analysis of historical and projected pull-through rates.
However, since borrower behavior cannot be perfectly predicted and modeled, an
element of economic ineffectiveness can be expected in the Company's pipeline
hedging relationships.

In the aggregate, the Company's strategy involves the use of a combination of
mortgage forward delivery commitments and mortgage options to maintain
appropriate risk management coverage related to IRLCs. The Company utilizes
mortgage forward delivery contracts to hedge a baseline portion of the Company's
pipeline composed of interest rate lock commitments that management believes are
probable of closing. Additionally, the Company utilizes options on mortgage
securities and certain other products to hedge an element of the pipeline which
is considered more uncertain of closing, and for which pull-through rates are
likely to be volatile. During the quarter ended December 31, 2001, a net gain of
approximately $15.4 million attributable to pipeline hedging results was
recognized to earnings and is included in net mortgage origination revenue.
Pursuant to the requirements of SFAS 133 (which are discussed in Note 4 of the
Consolidated Financial Statements) interest rate lock commitments and related
risk management derivative instruments are accounted for as non-designated
derivatives with changes in their values recorded to current earnings.

Interest rate lock commitments that are ultimately funded (closed) are
classified as loans held for sale and are included in the Company's mortgage
inventory. Closed loans in the mortgage inventory are also subject to interest
rate and pricing risk. The Company's risk management program involves the use of
mortgage forward delivery contracts to hedge 100% of its agency-eligible
conforming loans as forecasted loan sales. Pursuant to the terms of SFAS 133,
the Company accounts for the forward delivery contracts as cash flow hedges of
forecasted loan sales. The forward contracts achieve effective offset against
the changes in the value of the loans in that the forward contracts effectively
fix the future loan delivery price. At December 31, 2001, losses on forward
delivery contracts of $5.3 million were included in other comprehensive income
("OCI"). Pursuant to the requirements of SFAS 133, the unrealized losses in OCI
will be recognized to earnings on the loan settlement dates, as the forecasted
loan sales are consummated over the next 90 days.

Risk Management of Mortgage Servicing Rights

Mortgage servicing rights represent the capitalized value of the estimated
future net servicing revenues associated with the Company's servicing portfolio.
The Company maintains a risk management program intended to protect the value of
mortgage servicing rights from changes in value due to changes in estimated loan
prepayment speeds, which are mainly influenced by changes in interest rates.

The value of mortgage servicing rights is extremely sensitive to changes in
interest rates since interest rates are the primary driver of actual and
projected prepayment rates. As interest rates decline, prepayment rates increase
as a result of actual and expected refinancing activities of borrowers. As a
result, the value of mortgage servicing rights decreases in value as interest
rates decline and, generally, at accelerating rates depending in large measure
on the note rates of the underlying loans in relation to market interest rates.
The value of the Company's mortgage servicing rights is based on the present
value of expected cash flows received over the life of the loan using vendor
models which incorporate prepayment estimates to forecast estimated future
servicing revenues, servicing costs, ancillary revenues, escrow earnings, credit
losses and other expenses. Prior to the quarter ended September 30, 2001, the
Company estimated future prepayment speeds based on the application of a forward
interest rate bias. In considering the National's intent to pursue a sale of
HomeSide and the lack of liquidity in the market, as well as other increasing
uncertainties relating to the interest rate environment, the Company estimated
future prepayment speeds based on a static method during the quarter ended
September 30, 2001 and continuing through the current quarter ended December 31,
2001.

The Company's risk management program involves the use of a portfolio of risk
management derivative instruments, which increase in value as interest rates
decline. More specifically, management uses a combination of derivative
instruments designed to offset changes in the value of the mortgage servicing
rights in different interest rate scenarios. The Company also attempts to manage
basis risk, term sector risk, and liquidity risk by diversifying its portfolio
with an array of derivative instruments that are approved for use by the
Company's


                                       20
<PAGE>
ALCO. Accordingly, the hedge portfolio is generally comprised of mortgage
products, swap products and treasury products that are structured along various
points of the yield curve. The Company expects to continue to review and expand
its risk management framework.

The Company's risk-management derivative contracts are designated as fair value
hedges of the designated mortgage servicing rights (designated portfolios). As
permitted by SFAS 133, the "hedged risk" is defined at the beginning of the
hedge period and measured as the change in value of the designated portfolios
due to changes in the total value of the mortgage servicing portfolio. At the
inception of each hedge period, the Company formally documents the relationship
between the hedging instruments and the hedged items (representing the
individual designated portfolios described above), as well as its
risk-management objective and strategy for undertaking the hedging
relationships. The Company employs statistical correlation techniques - both at
the inception of the hedge period and on an ongoing basis - to formally assess
its expectation that changes in the value of the derivative contracts will be
highly effective in offsetting changes in the value of the designated hedge
portfolios. In its assessment of hedge effectiveness, the Company excludes the
change in the value of the derivative contracts due to time decay (theta) which
is recorded to current earnings.

HomeSide's risk management program also employs the use of non-designated
derivative contracts that are used to provide a level of economic offset against
the value changes attributable to the non-designated portfolios that do not
qualify for hedge accounting treatment under SFAS 133. Additionally, the Company
is party to certain risk management strategies that are structured to mitigate
yield curve risk and to provide a level of economic offset to the time decay
(theta). These non-designated derivatives are marked-to-market with changes in
value recorded to earnings.

During the first month of the quarter ended December 31, 2001, the Company did
not qualify for hedge accounting pursuant to the requirements of SFAS 133 for
mortgage servicing rights. As a result, for the month of October 2001 the
Company recognized a net gain of $516.5 million to current earnings related to
the change in fair value of its derivative instruments with no corresponding
hedge offset relative to the change in the fair value of the mortgage servicing
rights asset. During the months of November and December 2001, the Company
qualified for hedge accounting and as such its hedging relationships were highly
effective. Accordingly, the decrease in the value of the designated derivative
contracts (net of theta) of $1,015.2 million was recorded to earnings along with
an increase in the value of the designated mortgage servicing rights of $1,050.4
million. Additionally, pursuant to the guidance provided in Statement of
Financial Accounting Standard No. 140, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities" ("SFAS 140"), the
Company recorded a valuation provision totaling $597.4 million for the quarter
ended December 31, 2001.

Management maintains an ongoing expectation that the Company's risk management
hedging program will be effective in meeting corporate objectives over the
longer term. However, as a result of the new accounting requirements of SFAS
133, quarterly earnings will henceforth be impacted (positively or negatively)
to the extent that changes in the value of the hedged instruments do not
perfectly offset changes in the value of the designated mortgage servicing
rights (ineffectiveness). Given the magnitude of the Company's investment in
mortgage servicing rights, the accounting requirements of SFAS 133 could result
in a higher level of volatility in reported quarterly earnings as a result of
temporary market conditions that may impact quarterly hedge results without
compromise to the long-term hedge objectives.

Risk Management of Corporate Funding

As part of its corporate funding and balance sheet management strategies, the
Company maintains a desired level of its total borrowings through short-term
funding sources. To meet the Company's financing needs, short-term funding is
provided through the Company's commercial paper program and its short-term
facility with the National. Additionally, the Company can alter its weighting in
fixed-rate funding by converting medium-term notes to floating rate. During the
three-months ended December 31, 2001, the Company was party to $650 million in
interest rate swaps which were effective in converting $650 million of
medium-term notes to LIBOR-based funding. As discussed in Note 4 to the
Consolidated Financial Statements, the interest rate swaps were accounted for as
fair value hedges of the designated medium-term notes.


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
and from the National, commercial paper, medium-term notes and cash flow from
operations. In the past, the Company has also utilized short-term credit
facilities. Upon consummation of the transaction contemplated by the Asset
Purchase Agreement with WaMu, the Company would expect principal financing needs
to be the financing of the retained mortgage servicing rights asset along with
related financial hedges and operating expenses. The Company would expect that
to the extent cash generated from the closing proceeds and the retained assets
is inadequate to meet its liquidity needs, those needs can be met through
external facilities and inter-company borrowings with the National.


                                       21
<PAGE>
Operations

Net cash used in operations was $519.8 million for the quarter ended December
31, 2001. Net cash provided by operations was $403.8 million for the quarter
ended December 31, 2000. For the quarter ended December 31, 2001, the primary
uses of cash in operations were to fund loan origination and pay corporate
expenses. Cash provided from servicing fee income, loan sales and principal
repayments partially offset these uses of cash. For the quarter ended December
31, 2000, cash provided from servicing fee income, loan sales and principal
repayments were partially offset by cash used for the origination and purchase
of mortgage loans held for sale. Cash flows from loan origination 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. Increases in long
term rates generally result in lower loan refinancing activity, which results in
lower cash demands to meet production levels.

Investing

Net cash used in investing activities for the quarters ended December 31, 2001
and 2000 was $334.3 million and $383.5 million, respectively. For the quarter
ended December 31, 2001, cash was used primarily for the purchase of mortgage
servicing rights and for the purchase of risk management contracts. For the
quarter ended December 31, 2000, cash used in investing activities was primarily
for the purchase of mortgage servicing rights and purchases of premises and
equipment. For the quarter ended December 31, 2000, cash was provided by
proceeds from risk management contracts and early pool buyout reimbursements.

Financing

Net cash provided by financing activities for the quarter ended December 31,
2001 was $364.3 million. Net cash used in financing activities for the quarter
ended December 31, 2000 was $72.0 million. For the quarter ended December 31,
2001, the primary source of cash was from the issuance of commercial paper. This
inflow was partially offset by the repayment of borrowings from the National and
dividends paid to the National. For the quarter ended December 31, 2000, cash
was used for the repayment of commercial paper, repayment of borrowings from
HomeSide's line of credit, payment of debt issue costs, and dividends to the
Parent. Uses of cash were partially offset by the issuance of medium term notes.


OFF-BALANCE SHEET ARRANGEMENTS

On November 30, 1998, HomeSide formed a wholly-owned subsidiary, HomeSide
Funding Corporation ("HomeSide Funding"), whose sole purpose is to acquire
delinquent loans from HomeSide's servicing portfolio that are insured by the
Federal Housing Administration or guaranteed by the Department of Veterans
Affairs. The purchases are funded through sales to a trust.

In December 1998, HomeSide entered into a Pooling and Servicing Agreement with
Banc One Trust Company, N.A., as Trustee, and HomeSide Funding, as Transferor,
pursuant to which delinquent mortgage loans were sold to HomeSide Funding.
Subsequently, these loans were securitized and sold to the HomeSide Mortgage
Loan Buyout Trust 1998-A (the "Trust"). During the three months ended December
31, 2001, no delinquent loans were sold to HomeSide Funding. Effective November
29, 2001, the parties to the Pooling and Servicing Agreement agreed that no
additional increases would be made to the outstanding net investment.
Accordingly, no future delinquent loan sales are planned to HomeSide Funding.
The total principal amount of loans outstanding in the Trust as of December 31,
2001 approximated $316.9 million. At December 31, 2001, the Trust had commercial
paper borrowings outstanding of approximately $313.8 million. HomeSide held a
residual interest in loans sold to HomeSide Funding in the amount of $56.9
million and $33.4 million for the three months ended December 31, 2001 and 2000,
respectively. For the three months ended December 31, 2001, fair value was
estimated based on the average recovery periods and other economic factors.

Key economic assumptions used in measuring the fair value of HomeSide's
retained interests at December 31, 2001 and the effect on the fair value of
those retained interests from adverse changes in those assumptions are as
follows:

<Table>
<Caption>
Dollars in thousands                                       DECEMBER 31, 2001
------------------------------------------------------------------------------
<S>                                                        <C>
Fair value of retained interests                                 $59,614
Weighted-average expected foreclosure related costs                2.77%
Weighted-average discount rate (annual rate)                       2.48%
     Impact of 10% adverse change                                $  (507)
     Impact of 20% adverse change                                $(1,391)
Weighted-average recovery period (in months)                        9.68
     Impact of 10% adverse change                                $  (801)
     Impact of 20% adverse change                                $(1,712)
</Table>

The above sensitivities are hypothetical and should be used with caution. As
the amounts indicate, changes in fair value based on variations in assumptions
generally cannot be extrapolated because the relationship of the change in
assumption to the change in fair value may not be linear. Also, in this table,
the effect of a variation in a particular assumption on the fair value of the
retained interest is calculated without changing any other assumption. In
reality, changes in one factor may result in changes in another (for example,
changes in average recovery period could result in changes in discount rates),
which might magnify or counteract the sensitivities.

The following table summarizes cash flows between HomeSide and the
securitization special purpose entity:

<Table>
<Caption>
                                                      FOR THE THREE MONTHS
Dollars in thousands                                 ENDED DECEMBER 31, 2001
------------------------------------------------------------------------------
<S>                                                        <C>
Other cash flows received on retained interest             $7,672
</Table>

Actual credit losses were $1.70 million and $1.76 million for the three months
ended December 31, 2001 and 2000, respectively.


QUANTITATIVE AND QUALITATIVE MARKET RISK

There have been no material changes in the Company's market risk from September
30, 2001. For information regarding the Company's market risk, refer to Form
10-K for the fiscal year ended September 30, 2001 of HomeSide International,
Inc. Additionally, the results of HomeSide's risk management programs and the
associated accounting for derivative instruments and hedging activities pursuant
to SFAS 133, as amended, is more fully described in Note 4 to the Consolidated
Financial Statements.


                                       22
<PAGE>
                           PART II - OTHER INFORMATION


ITEM 1.  Legal Proceedings

HomeSide is a defendant in a number of legal proceedings arising in the normal
course of business. HomeSide, 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,
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.

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:

<TABLE>
<CAPTION>
Number      Description
------      -----------
<S>         <C>
10.82       Employment Agreement with Joseph J. Whiteside dated September 1, 2001.
10.83       Employment Agreement with Gary W. Fiedler dated September 1, 2001.
10.84       Employment Agreement with Susan E. Lester dated October 22, 2001.
</TABLE>

(b)   Reports on Form 8-K

      HomeSide International, Inc. filed no reports on Form 8-K during the three
      months ended December 31, 2001.


                                       23
<PAGE>
                                   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 International, Inc.
                           ----------------------------
                           (Registrant)

Date: February 14, 2002    By: /s/Joseph J. Whiteside
                                  ----------------------------------------------
                                  Joseph J. Whiteside
                           Chief Executive Officer (Principal Executive Officer)


Date: February 14, 2002    By: /s/Susan E. Lester
                                  ----------------------------------------------
                                  Susan E. Lester
                           Executive Vice President and Chief Financial Officer
                               (Principal Financial and Accounting Officer)


                                       24