UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

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

                For the quarterly period ended December 31, 1999

                                       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)

         Delaware                                       59-3387041

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

                   7301 Baymeadows Way, Jacksonville, FL 32256

               (Address of principal executive offices) (Zip Code)

                                 (904) 281-3000

               (Registrant's telephone number, including area code)



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

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

           Class                                Outstanding at February 14, 2000

Common stock $0.01 par value                                 1
Class C non-voting common stock $1.00 par value             none













                              FINANCIAL INFORMATION

ITEM 1.  Financial Statements
<TABLE>

                          HOMESIDE INTERNATIONAL, INC.
                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)
                    (Dollars in Thousands, Except Share Data)
<CAPTION>

                                                                                     December 31, 1999      September 30, 1999
                                                                                   ----------------------   ----------------------
ASSETS

<S>                                                                                           <C>                      <C>
Cash and cash equivalents                                                                     $  606,021               $  202,859
Mortgage loans held for sale, net                                                              1,180,228                1,292,562
Mortgage servicing rights, net                                                                 3,907,681                3,488,957
Early pool buyout advances                                                                       240,063                  335,059
Accounts receivable, net                                                                         288,998                  255,759
Premises and equipment, net                                                                       71,114                   67,900
Goodwill, net                                                                                    654,719                  663,729
Other assets                                                                                      85,973                   84,530
                                                                                   ----------------------   ----------------------
Total Assets                                                                                  $7,034,797               $6,391,355
                                                                                   ======================   ======================

LIABILITIES AND STOCKHOLDER'S EQUITY

Accounts payable and accrued liabilities                                                      $  800,491               $  666,442
Notes payable                                                                                  3,411,258                2,899,304
Long-term debt                                                                                 1,329,664                1,331,292
Deferred income taxes, net                                                                       225,672                  220,775
                                                                                   ----------------------   ----------------------
Total Liabilities                                                                              5,767,085                5,117,813
                                                                                   ----------------------   ----------------------

Stockholder's Equity:
Common stock:
     Common stock, $.01 par value, 100 shares authorized and 1 share 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                                                                     1,231,302                1,231,302
Retained earnings                                                                                 36,410                   42,240
                                                                                   ----------------------   ----------------------
Total Stockholder's Equity                                                                     1,267,712                1,273,542
                                                                                   ----------------------   ----------------------
Total Liabilities and Stockholder's Equity                                                    $7,034,797               $6,391,355
                                                                                   ======================   ======================
</TABLE>







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


<PAGE>


<TABLE>

                          HOMESIDE INTERNATIONAL, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)
                             (Dollars in Thousands)

<CAPTION>
                                                       For the Three          For the Three
                                                       Months Ended           Months Ended
                                                     December 31, 1999      December 31, 1998
                                                     ------------------    --------------------
REVENUES:

<S>                                                          <C>                     <C>
Mortgage servicing fees                                      $171,198                $134,177
Amortization of mortgage servicing rights                     (97,528)                (83,658)
                                                     ------------------    --------------------
    Net servicing revenue                                      73,670                  50,519

Interest income                                                36,165                  46,175
Interest expense                                              (35,572)                (32,334)
                                                     ------------------    --------------------
    Net interest revenue                                          593                  13,841

Net mortgage origination revenue                               17,008                  38,286
Other income                                                      863                   1,786
                                                     ------------------    --------------------
    Total Revenues                                             92,134                 104,432


EXPENSES:

Salaries and employee benefits                                  29,818                  34,514
Occupancy and equipment                                          8,550                   6,447
Servicing losses on investor-owned loans
   and foreclosure-related expenses                              8,368                   9,784
Goodwill amortization                                            9,010                   8,919
Other expenses                                                  13,325                  16,458
                                                     ------------------    --------------------
    Total Expenses                                              69,071                  76,122

Income before income taxes                                      23,063                  28,310
Income tax expense                                               4,893                  14,519
                                                     ------------------    --------------------

Net income                                                     $18,170                 $13,791
                                                     ==================    ====================

</TABLE>







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


<TABLE>


                          HOMESIDE INTERNATIONAL, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (UNAUDITED)
                             (Dollars in Thousands)

<CAPTION>

                                                                      For the Three          For the Three
                                                                       Months Ended           Months Ended
                                                                    December 31, 1999       December 31, 1998
                                                                    -------------------   ---------------------
CASH FLOWS  PROVIDED BY OPERATING ACTIVITIES:

<S>                                                                           <C>                     <C>
Net income                                                                    $ 18,170                $ 13,791
Adjustments to reconcile net income to net cash provided by operating
      activities:
  Amortization of mortgage servicing rights                                     97,528                  83,658
  Depreciation and amortization                                                 11,483                   9,537
  Servicing losses on investor-owned loans                                       2,530                   3,673
  Change in deferred income tax liability                                        4,897                  15,294
  Origination, purchase and sale of loans held for sale, net of
    repayments                                                                 112,334                (167,992)
  Change in accounts receivable                                                (35,769)                  4,442
  Change in other assets and accounts payable and accrued
    liabilities                                                                 (8,639)                 57,916
                                                                    -------------------   ---------------------
Net cash provided by operating activities                                      202,534                  20,319

CASH FLOWS USED IN INVESTING ACTIVITIES:

Purchase of premises and equipment, net                                         (6,251)                (6,457)
Acquisition of mortgage servicing rights                                      (234,919)              (254,234)
Net purchase of risk management contracts                                     (138,807)              (220,933)
Net early pool buyout reimbursements                                            94,996                272,552
                                                                    -------------------   ---------------------
Net cash used in investing activities                                         (284,981)              (209,072)

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:

Net borrowings from (repayments to)  banks                                     494,599             (1,031,899)
Issuance of commercial paper, net of repayments                                 17,354              1,308,367
Payment of debt issue costs                                                    (2,123)                   -
Repayment of long-term debt                                                      (221)                   (182)
Dividends paid to the Parent                                                  (24,000)                (30,533)
                                                                    -------------------   ---------------------
Net cash provided by financing activities                                      485,609                245,753
Net increase in cash and cash equivalents                                      403,162                  57,000
Cash and cash equivalents at beginning of period                               202,859                  35,008
                                                                    -------------------   ---------------------
Cash and cash equivalents at end of period                                    $606,021                $ 92,008
                                                                    ===================   =====================

Supplemental disclosure of cash flow information:
Interest paid                                                                 $ 38,699                $ 38,136
Income taxes paid                                                             $   -                   $ 14,953


</TABLE>






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


<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 (consisting of normal
recurring  adjustments)  considered  necessary for a fair presentation have been
included.

Operating  results for the three  months  ended  December 31, 1999 and the three
months ended  December 31, 1998 are not  necessarily  indicative  of the results
that may be expected for the fiscal year ending  September 30, 2000. 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, 1999
of HomeSide International, Inc.

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 are maintained with brokers in accordance with the requirements
of International Swap Dealer  Agreements.  At December 31, 1999, margin deposits
amounted to approximately $318.7 million.

3.       MORTGAGE SERVICING RIGHTS

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

Balance, September 30, 1999                  $3,488,957
Additions                                       234,919
Deferred hedge loss                             281,333
Amortization                                    (97,528)
                                          -----------------
Balance, December 31, 1999                   $3,907,681
                                          =================

4.       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>
Floating Rate Notes                                    $    230,000             6.26%                 5.96%
Commercial Paper                                          1,181,258             6.16%                 5.69%
National Australia Bank unsecured facility                2,000,000             6.20%                 5.78%
                                                  ----------------------
  Total, December 31, 1999                             $  3,411,258
                                                  ======================

Floating Rate Notes                                    $    230,000             5.67%                 5.67%
Commercial Paper                                          1,163,903             5.57%                 5.12%
National Australia Bank unsecured facility                1,505,401             5.46%                 5.22%
                                                  ----------------------
  Total, September 30, 1999                            $  2,899,304
                                                  ======================
</TABLE>


On August 16, 1999,  HomeSide  issued $230.0 million in floating rate notes (the
"Floating  Rate  Notes") due August 16, 2000.  Interest is payable  quarterly in
arrears on February 16, May 16, and August 16, 2000. The floating Rate Notes are
unsecured  obligations of HomeSide and rank equally with all other unsecured and
unsubordinated  indebtedness  of HomeSide.  The per annum  interest  rate on the
Floating Rate Notes is equal to the three-month  LIBOR,  reset  quarterly,  plus
twenty basis points,  or 0.20%.  The weighted  average interest rate on Floating
Rate Notes during the three months ended December 31, 1999 was 5.96%

On  October  21,  1998,  HomeSide  Lending,  Inc.  established  a  $1.5  billion
commercial paper program. The program is supported by the Company's bank line of
credit and outstanding  commercial paper reduces available  borrowings under the
bank line of credit. At December 31, 1999, a total of $1.2 billion of commercial
paper was  outstanding.  The weighted  average interest rate on commercial paper
outstanding during the three month period ended December 31, 1999 was 5.69%.

On October 18,  1999,  HomeSide  entered into a $2.0  billion  revolving  credit
facility (the "Independent Bank Credit Facility") with an independent  syndicate
of banks.  This agreement  replaces  HomeSide's  previous bank credit  facility.
Borrowings under the Independent Bank 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 prime rate or various  federal fund
rates plus an applicable  margin,  or (iii)  various  federal fund rates plus an
applicable  margin.  The primary  purpose of this credit  facility is to provide
liquidity  back-up for HomeSide's  $1.5 billion  commercial  paper  program.  At
December 31, 1999, there was no balance outstanding under this credit line.

On June 23, 1998,  HomeSide entered into an agreement for an unsecured revolving
credit  facility with the National.  The agreement was amended on June 22, 1999.
Under the credit  facility,  HomeSide can borrow up to $2.5 billion,  subject to
limits imposed by regulatory  authorities.  As of December 31, 1999,  Australian
financial  regulations limited the National's ability to lend funds to HomeSide,
a non-bank affiliate, to approximately $2.1 billion. 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 HomeSide and the National at the
time of the borrowing. For LIBOR-based borrowings,  the interest rate is charged
at the  corresponding  LIBOR rate. At December 31, 1999, the amount  outstanding
under this credit facility  totaled $2.0 billion.  The weighted average interest
rate on outstanding borrowings under this credit facility during the three month
periods ended December 31, 1999 and 1998 were 5.78% and 5.22%, respectively.

5.       LONG-TERM DEBT

11.25 % Notes

On May 14, 1996,  HomeSide  issued  $200.0  million of 11.25% notes (the "Parent
Notes") maturing on May 15, 2003, and paying interest semiannually in arrears on
May 15 and  November 15 of each year.  The Parent  Notes are  redeemable  at the
option of HomeSide,  in whole or in part,  at any time on or after May 15, 2001,
at certain fixed redemption prices. The indenture contains covenants that impose
limitations and  restrictions,  including  requirements to maintain  certain net
worth and ratio  requirements.  In  addition,  the Parent Notes are secured by a
second priority pledge of the common stock of HomeSide  Lending.  HomeSide is in
compliance with all net worth and ratio  requirements  included in the indenture
relating to the Parent  Notes.  HomeSide used a portion of the proceeds from its
February 5, 1997 offering of common stock to pre-pay $70.0 million of the Parent
Notes at a premium of $7.9 million.  The amount outstanding at December 31, 1999
was $130.0  million.  The  balance of the Parent  Notes at  December  31,  1999,
including the fair value adjustment resulting from the merger with the National,
was $145.7 million.

Medium-term notes

As of  December  31,  1999,  outstanding  medium-term  notes  issued by HomeSide
Lending under a $2.568 billion shelf registration  statement were as follows (in
thousands):
<TABLE>
<CAPTION>

         Issue Date              Outstanding Balance            Coupon Rate               Maturity Date

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

At December 31, 1999,  the total amount of  medium-term  notes  outstanding  was
$1,160 million,  made up of $185 million of floating-rate notes and $975 million
of fixed-rate notes that have been converted by interest rate swap agreements to
floating-rate   notes.  The  weighted  average  borrowing  rate  on  medium-term
borrowings  issued for the three months ended  December 31, 1999,  including the
effect of the interest rate swap agreements, was 5.87%.

The balance of the  medium-term  notes at December 31, 1999,  including the fair
value adjustment resulting from the merger with the National,  was $1.2 billion,
of which $0.3 billion is current.

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, 1999,  including the fair value  adjustments  resulting from the merger with
the National, was $23.2 million.

6.       NEW ACCOUNTING STANDARDS

In June 1998,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting Standard No. 133,  "Accounting for Derivative  Instruments
and Hedging Activities" ("FAS 133"). This statement  standardizes the accounting
for derivative  instruments  and hedging  activities by requiring that an entity
recognize  those items as assets or  liabilities  in the  statement of financial
position  and  measure  them at fair  value.  If certain  conditions  are met, a
derivative  instrument  may be  specifically  designated  as (a) a hedge  of the
exposure to changes in the fair value of a recognized asset or liability,  or of
an unrecognized  firm commitment,  (b) a hedge of the exposure to variability in
the cash flows of a recognized asset, liability or forecasted transaction or (c)
a hedge of the foreign currency exposure of an unrecognized firm commitment,  an
available-for-sale  security, a forecasted  transaction or a net investment in a
foreign operation. In June 1999, the Financial Accounting Standards Board issued
Statement of Financial  Accounting Standards No. 137, "Accounting for Derivative
Instruments  and Hedging  Activities  - Deferral of the  Effective  Date of FASB
Statement  No. 133 - an Amendment  of FASB  Statement  No. 133." This  statement
deferred  the  effective  date of FAS 133 to fiscal  quarters  of  fiscal  years
beginning  after June 15, 2000.  Management has not yet determined the impact of
these statements on the financial statements of HomeSide.

10.      DIVIDENDS

On October 20, 1999,  the Company paid  dividends to the Parent in the amount of
$24.0 million.

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

General

HomeSide  International,   Inc.  ("HomeSide"  or  the  "Company"),  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,  Ltd.  (the
"National")  acquired  all  outstanding  shares of the common stock of HomeSide,
Inc.  Predecessor  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's  strategy  emphasizes  variable cost mortgage  origination,  low cost
servicing,  and  effective  risk  management.   Headquartered  in  Jacksonville,
Florida,  HomeSide  Lending  ranks  as the 7th  largest  originator  and the 7th
largest  servicer  in the United  States at  December  31,  1999,  based on data
published by Inside Mortgage Finance.

HomeSide plans to build its core  operations  through (i) improved  economies of
scale  in  servicing  costs;  (ii)  increased   productivity  using  proprietary
technology;  and  (iii)  expanded  and  diversified  variable  cost  origination
channels.  In addition,  HomeSide  intends to pursue  additional  loan portfolio
acquisitions  and strategic  origination  relationships  similar to its existing
relationships with Banc One Mortgage  Corporation  ("Banc One"),  People's Bank,
and Cendant Mortgage Company ("Cendant").

Operating  results  for the three  month  periods  ended  December  31, 1999 and
December  31, 1998 are not  necessarily  indicative  of the results  that may be
expected for the fiscal year ending September 30, 2000. 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,  1999 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 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, with a focus on wholesale
origination (correspondent,  co-issue, and broker). HomeSide's other origination
channels include telemarketing, direct mail campaigns and other advertising, and
mortgages related to affinity group and co-branding partnerships.  HomeSide also
purchases  servicing  rights  in bulk  from  time to  time.  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  eliminates  the fixed costs
associated with traditional mortgage branch offices.  Without the burden of high
fixed  cost  origination  overhead,  HomeSide  is well  positioned  to weather a
variety of interest rate environments.

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, 1999 and
December 31, 1998 (in millions):

                                   For the Three           For the Three
                                   Months Ended            Months Ended
                                 December 31, 1999       December 31, 1998

                                --------------------    --------------------
Correspondent                               $ 2,563                  $5,298
Co-issue                                      2,430                     872
Broker                                          469                   1,090
                                --------------------    --------------------
  Total wholesale                             5,462                   7,260
Direct                                          147                     323
                                --------------------    --------------------
  Total production                            5,609                   7,583
Bulk acquisitions                             4,558                   7,046
                                --------------------    --------------------
  Total production and
    Acquisitions                            $10,167                 $14,629
                                ====================    ====================

Total loan  production,  excluding bulk  acquisitions,  was $5.6 billion for the
three  months  ended  December  31, 1999  compared to $7.6 billion for the three
months ended  December 31, 1998, a 26% decrease.  The decrease was primarily due
to an increase in interest rates which resulted in a decrease in the size of the
mortgage origination market.

When  interest  rates  rise,  loan  production  decreases  as  fewer  mortgagees
refinance their loans.  Refinances were 21% of HomeSide's  production volume for
the quarter  ended  December  31,  1999,  compared to 64% for the quarter  ended
December 31, 1998.

Economies of scale are vital to the  long-term  viability of mortgage  servicing
and are increasingly important to remain competitive in the industry. During the
quarter,   HomeSide  continued  to  pursue  growth  opportunities  through  bulk
acquisitions  of  mortgage  servicing  rights  and  expansion  of 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 the  Preferred  Partners  and offers the customer
mortgage-related  products.  Preferred Partner relationships  contributed 38% of
HomeSide's   production  volume  for  the  quarter.   HomeSide   completed  bulk
acquisitions  totaling  $4.6  billion  and $7.0  billion  during the three month
periods ended December 31, 1999 and 1998, respectively.

   Servicing Portfolio

Management  believes  that  HomeSide  is  one  of the  most  efficient  mortgage
servicers in the industry based on its servicing cost per loan and the number of
loans  serviced per employee.  The servicing  operation  makes  extensive use of
state-of-the-art technology, process re-engineering and expense management. With
a portfolio size of $151 billion,  HomeSide  services the loans of approximately
1.7  million  homeowners  from  across the United  States  and is  committed  to
protecting the value of this important asset by a sophisticated  risk management
strategy.  HomeSide anticipates its low cost of servicing loans will continue to
maximize the bottom-line impact of its growing servicing  portfolio.  HomeSide's
focus on efficient and low cost  processes is pursued  through the selective use
of  automation,  strategic  outsourcing  of  selected  servicing  functions  and
effective control of delinquencies and foreclosures.

The following  information  on the dollar amounts of loans serviced is presented
to aid in  understanding  the results of operations  and financial  condition of
HomeSide for the three month  periods  ended  December 31, 1999 and December 31,
1998 (in millions):

                                   For the Three          For the Three
                                   Months Ended            Months Ended
                                 December 31, 1999       December 31, 1998
                                 ------------------      -----------------
Balance at beginning of
  Period                                 $ 145,552              $ 115,800
   Additions                                10,157                 13,668
   Scheduled amortization                    1,038                    772
   Prepayments                               3,690                  9,586
   Foreclosures                                246                    313
                                 ------------------      -----------------
       Total reductions                      4,974                 10,671
                                 ------------------      -----------------
Balance at end of period                 $ 150,735              $ 118,797
                                 ==================      =================

The number of loans  serviced at December  31,  1999 was  1,706,806  compared to
1,426,822  at December 31,  1998.  HomeSide's  strategy is to build its mortgage
servicing   portfolio  by   concentrating  on  variable  cost  loan  origination
strategies,  and as a result, benefit from improved economies of scale. A key to
HomeSide's  future growth is its  proprietary  servicing  software.  This system
allows  HomeSide  to double the number of loans  typically  serviced on a single
system. At December 31, 1999,  substantially all of the servicing  portfolio was
serviced on the proprietary system.

Results of Operations

For the three months ended  December 31, 1999 compared to the three months ended
December 31, 1998

   Summary

HomeSide's net income  increased 32% to $18.2 million for the three months ended
December 31, 1999 compared to $13.8 million for the three months ended  December
31,  1998.  HomeSide's  net income,  excluding  goodwill  amortization  from the
acquisition of HomeSide by the National,  increased 19% to $27.1 million for the
three months ended  December  31, 1999  compared to $22.7  million for the three
months  ended  December  31,  1998.  Total  revenues  for the three months ended
December 31, 1999 were $92.1  million  compared to $104.4  million for the three
months ended  December 31, 1998, a 12%  decrease.  An increase in net  servicing
revenue  was  offset  by  decreases  in  net  interest  revenue,   net  mortgage
origination  revenue and other income.  Net servicing  revenue increased 46% for
the three  months  ended  December  31, 1999  compared to the three months ended
December 31, 1998, primarily due to an increase in the servicing portfolio.  Net
interest  revenue  decreased  due to  increased  funding  necessary  to  support
increased   mortgage  servicing  assets  and  a  decreased  average  balance  of
interest-earning  assets. Net mortgage  origination revenue decreased due to the
increase in interest  rates which resulted in decreased  production  volumes and
pricing  competition.  Total  expenses  decreased  as a result of a decrease  in
production related expenses  associated with a decline in refinance activity and
a decrease in servicing related expenses associated with a decline in prepayment
activity.  Income  tax  expense  decreased  as a  result  of a  decrease  in the
effective  income  tax rate  caused  by a change  in the  geographic  mix of the
servicing portfolio into lower tax states and a decrease in production volume in
states with higher tax rates.

Net Servicing Revenue

Net servicing  revenue was $73.7 million for the three months ended December 31,
1999 compared to $50.5  million for the three months ended  December 31, 1998, a
46% increase.  Net servicing  revenue is comprised of mortgage  servicing  fees,
ancillary servicing revenue, and amortization of mortgage servicing rights.

Mortgage  servicing  fees  increased 28% to $171.2  million for the three months
ended  December 31, 1999  compared to $134.2  million for the three months ended
December 31, 1998,  primarily as a result of  portfolio  growth.  The  servicing
portfolio  increased  $31.9  billion to $150.7  billion  at  December  31,  1999
compared to $118.8  billion at December 31, 1998, a 27% increase.  The portfolio
growth is primarily due to loan production, bulk acquisitions, and a decrease in
mortgage  loan  prepayments  as  fewer  mortgagees   refinance  their  loans.  A
significant  portion of this  portfolio  growth was also due to the  purchase of
First Chicago NBD Mortgage Company's $18 billion servicing portfolio on March 4,
1999.  HomeSide's  weighted  average interest rates of the mortgage loans in the
servicing  portfolio  were 7.45% and 7.65% at December 31, 1999 and December 31,
1998,  respectively.  The weighted average  servicing fee,  including  ancillary
income,  for the  servicing  portfolio  was  0.467% for the three  months  ended
December 31, 1999  compared to 0.463% for the three  months  ended  December 31,
1998. The increase in the weighted average  servicing fee was due to a change in
the mix such that the portfolio is made up of loans with higher service fees.

Amortization  expense was $97.5 million for the three months ended  December 31,
1999 compared to $83.7  million for the three months ended  December 31, 1998, a
16%  increase.  Amortization  expense  increased  mainly as a result of a higher
average balance of mortgage  servicing rights during the quarter.  This increase
was  partially  offset  by  the  effects  of  rising  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.  An
increase  in  mortgage  interest  rates  results  in a  decrease  in  prepayment
estimates used in calculating periodic  amortization  expense.  Because mortgage
servicing rights are amortized over the expected period of service fee revenues,
a  decrease  in  mortgage  prepayment  activity  typically  results  in a longer
estimated  life  of  the  mortgage  servicing  assets  and,  accordingly,  lower
amortization expense.

   Net Interest Revenue

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

Loan  refinancing  levels are the largest  contributor to changes in the size of
the  mortgage  origination  market.  As  interest  rates rise,  fewer  borrowers
refinance their mortgages,  resulting in a decrease in the mortgage  origination
market.  Lower loan production volumes result in lower average balances of loans
held for sale and  consequently  lower levels of interest  income from  interest
earned on such loans  prior to their sale.  This lower level of interest  income
due to decreased  volumes is partially  offset by the higher 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  totaled $0.6 million for the three months ended  December
31, 1999 compared to $13.8 million for the three months ended December 31, 1998.
The decrease in net interest revenue was primarily due to a decrease in interest
income earned on loans held for sale as a result of lower average balances and a
narrowing  of the  spread  between  short-term  and  long-term  interest  rates.
Interest credits earned on custodial  balances decreased due to lower prepayment
activity.  In addition,  interest expense increased due to the funding of higher
mortgage servicing assets.

   Net Mortgage Origination Revenue

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

Net mortgage  origination  revenue was $17.0  million for the three months ended
December 31, 1999 compared to $38.3 million for the three months ended  December
31, 1998.  The decrease was primarily  due to a decrease in  production  volumes
resulting from the rising interest rate environment.  Higher interest rates have
also sparked fierce pricing competition for mortgage production as some mortgage
originators have reduced their pricing margins in order to fill capacity.

   Other Income

Other  income for the three  months  ended  December  31, 1999 was $0.9  million
compared to $1.8  million for the three  months  ended  December 31, 1998, a 50%
decrease.  The decrease  was due to volume  decreases in real estate tax service
fees.

   Salaries and Employee Benefits

Salaries and employee  benefits  expense was $29.8  million for the three months
ended  December  31, 1999  compared to $34.5  million for the three months ended
December 31, 1998, a 14% decrease.  The average  number of full-time  equivalent
employees  was 2,551 for the three  months ended  December 31, 1999  compared to
2,496 for the three months ended December 31, 1998. The decrease in salaries and
employee  benefits is primarily  attributable  to decreases  in  incentives  and
temporary  staffing  as a result  of the  decrease  in  production  volumes  and
decreased prepayment activity.

   Occupancy and Equipment Expense

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, 1999 was $8.6 million compared to $6.4 million for the
three months ended  December 31, 1998, a 34%  increase.  The increase in expense
was mainly due to the increased  expenses incurred to enhance processing systems
and technology expenditures necessary to support targeted business growth.

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

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

The servicing losses on investor-owned  loans and  foreclosure-related  expenses
totaled $8.4 million for the three  months ended  December 31, 1999  compared to
$9.8  million for the three months  ended  December  31, 1998.  The decrease was
primarily  attributable to the Company's Early Pool Buyout Program.  As HomeSide
sells mortgage loans to HomeSide Funding, Inc., HomeSide no longer incurs credit
related expenses associated with the transferred loans.

Included in the balance of accounts payable and accrued  liabilities at December
31, 1999 is a reserve for estimated servicing losses on investor-owned  loans of
$16.7 million.  The reserve has been established for potential losses related to
the  mortgage  servicing  portfolio.  Increases  to the  reserve  are charged to
earnings as servicing losses on  investor-owned  loans. The reserve is decreased
for  actual  losses  incurred  related  to  the  mortgage  servicing  portfolio.
HomeSide'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. Servicing
losses are generally greatest during the three to six year age of the loan.

The  following   table  sets  forth   HomeSide's   delinquency  and  foreclosure
experience:
<TABLE>
<CAPTION>

                        Servicing Portfolio Delinquencies
                             (percent by loan count)

                                                                                  December 31, 1999      December 31, 1998
                                                                                 --------------------    -------------------
<S>                                                                              <C>                     <C>
Servicing Portfolio Delinquencies, excluding bankruptcies (at end of period)
          30 days                                                                       3.37%                  3.84%
          60 days                                                                       0.62%                  0.78%
          90+ days                                                                      0.59%                  0.72%
                                                                                 --------------------    -------------------
               Total past due                                                           4.58%                  5.34%
                                                                                 ====================    ===================
          Foreclosures pending                                                          0.55%                  0.73%
                                                                                 ====================    ===================
</TABLE>

   Other Expenses and Goodwill Amortization

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

Other  expenses were $13.3 million for the three months ended December 31, 1999,
compared to $16.5  million for the three months  ended  December 31, 1998, a 19%
decrease.  The  decrease is primarily  due to a decrease in expenses  associated
with  decreased  production  volumes  and a  decrease  in  prepayment  activity.
Goodwill amortization was $9.0 million and $8.9 million,  respectively,  for the
three month periods ended December 31, 1999 and December 31, 1998.

   Income Tax Expense

HomeSide's  income tax  expense  was $4.9  million  for the three  months  ended
December 31, 1999 compared to $14.5 million for the three months ended  December
31,  1998.  The  effective  income tax rates for the three month  periods  ended
December  31, 1999 and  December  31, 1998 were 21% and 51%,  respectively.  The
decrease in the effective  income tax rate was due to a change in the geographic
mix of  the  servicing  portfolio  into  lower  tax  states  and a  decrease  in
production  volume in states with higher tax rates. In the current interest rate
environment, this trend is expected to continue.

Risk Management Activities

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

During the three months ended December 31, 1999,  HomeSide  utilized  options on
U.S.  Treasury bond and note  futures,  U.S.  Treasury bond futures,  options on
Eurodollar  futures,  swaptions,  interest rate swap cap structures and mortgage
pass-throughs  to  protect a  significant  portion  of the  market  value of its
mortgage  servicing  portfolio  from a  decline  in value.  The risk  management
contracts used by HomeSide have  characteristics such that they tend to increase
in value as interest rates decline.  Conversely, these risk management contracts
tend to decline in value as interest rates rise.  Accordingly,  changes in value
of these risk management instruments will tend to move inversely with changes in
value of HomeSide's mortgage servicing rights.

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

At December 31, 1999,  deferred losses on risk management  contracts resulted in
net deferred hedge losses of $760.8 million which were  substantially  offset by
changes in the value of mortgage  servicing  rights and included in the carrying
value of mortgage  servicing  rights.  Activity in the  deferred  hedge  account
during the three months ended December 31, 1999 is as follows (in thousands):

 Net deferred hedge balance at September 30, 1999             $  (494,743)
 Net deferred hedge loss                                         (281,333)
 Amortization                                                      15,230
                                                             ------------------
 Net deferred hedge balance at December 31, 1999              $  (760,846)
                                                             ==================

HomeSide's  future  cash needs as they  relate to its  hedging  program  will be
influenced by such factors as long-term  interest rates,  loan production levels
and  growth in the  mortgage  servicing  portfolio.  The fair value of open risk
management  contracts at December 31, 1999 was $(445.3) million.  This amount is
comprised  of  interest  rate  swaps,  caps and  swaptions  with a fair value of
$(481.4)  million,  partially  offset by options on U.S.  Treasury bond and note
futures,  options on Eurodollar futures, and mortgage  pass-throughs with a fair
market value of $36.1  million.  The premiums paid on options along with amounts
due to or from counterparties  related to risk management contracts are included
in Other Assets and Other Liabilities in the accompanying  consolidated  balance
sheet.  See  "Liquidity  and  Capital   Resources"  for  further  discussion  of
HomeSide's  sources  and  uses of cash.  See  Note 3 of  Notes  to  Consolidated
Financial  Statements for a description of HomeSide's  accounting policy for its
risk management contracts and Notes 12 and 13 of Notes to Consolidated Financial
Statements for additional fair value disclosures with respect to HomeSide's risk
management  contracts included in HomeSide's Form 10-K for the fiscal year ended
September 30, 1999.

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 its commercial  paper program,  a
credit facility with the National,  medium-term notes,  floating-rate  notes, an
independent  syndicate  of  banks,  repurchase  agreements,  and cash  flow from
operations.  HomeSide  retained  excess  cash at  December  31, 1999 in order to
mitigate  the risk that the  Company  might  not have been able to borrow  funds
during the  beginning of calendar  2000 as a result of  potential  complications
associated with the change to Year 2000.  HomeSide  continues to investigate and
pursue  alternative and supplementary  methods to finance its growing operations
through  the public and  private  capital  markets.  These may  include  methods
designed  to expand  the  Company's  financial  capacity  and reduce its cost of
capital.  In  addition,  to  facilitate  the sale and  distribution  of  certain
mortgage products, HomeSide Mortgage Securities, Inc., a wholly-owned subsidiary
of HomeSide Lending, Inc., may continue to issue mortgage-backed securities.

Operations

Net cash  provided by  operations  for the quarter  ended  December 31, 1999 was
$202.5  million.  Net cash provided by operations for the quarter ended December
31, 1998 was $20.3 million.  Cash provided from servicing fee income, loan sales
and principal  repayments was partially  offset by cash used for the origination
and purchase of mortgage loans held for sale and to pay corporate expenses. Cash
flows from loan originations are dependent upon current economic  conditions and
the level of long-term  interest  rates.  Increases in long-term  interest rates
generally result in lower loan refinancing activity, which results in lower cash
demands to meet loan production levels.

Investing

Net cash used in investing  activities  for the quarter ended  December 31, 1999
was $285.0 million.  Net cash used in investing activities for the quarter ended
December  31, 1998 was $209.1  million.  Cash used in investing  activities  was
primarily  for the  purchase of mortgage  servicing  rights and risk  management
contracts.  Cash was provided by proceeds  from risk  management  contracts  and
early pool buyout  reimbursements.  Future uses of cash for investing activities
will be dependent  on the mortgage  origination  market and  HomeSide's  hedging
needs.  HomeSide is not able to estimate  the timing and amount of cash uses for
future  acquisitions of other mortgage banking  entities,  if such  acquisitions
were to occur.

Financing

Net cash provided by financing  activities  for the quarters  ended December 31,
1999 and 1998 were $485.6  million and $245.8  million,  respectively.  Cash was
provided by borrowings  from the National and the issuance of commercial  paper.
Cash was used to repay borrowings from the National,  commercial paper,  payment
of debt issue costs, and to pay dividends to the Parent.

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

Year 2000

General.  In common with many business users of computers  around the world, the
Company  established a program  designed to minimize the impact of the change to
2000  (including  Leap Day 2000) on the Company and its customers.  The Board of
Directors  made the work  associated  with the change to 2000 a key priority for
management.  As of the date of this filing,  the Company has encountered no Year
2000 issue that has impacted customer service levels and is conducting  business
as usual. The Company experienced a few minor Year 2000-related  incidents,  all
of which were corrected  prior to any disruption in customer  service.  However,
there remains the possibility of isolated issues throughout the first quarter of
2000, particularly over Leap Day. For this reason,  HomeSide's Year 2000 Program
continues through March 31, 2000.

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

The  Company  began  its   information   technology  Year  2000  assessment  and
remediation  efforts  in the third  quarter  of  calendar  year  1996  under the
sponsorship  of its  executive  management.  A formal,  enterprise-wide  program
commenced in January 1998. The Year 2000 issue was identified as a top priority.
The Company's  executive  management  and Board of Directors  were provided with
frequent detailed updates. The Company dedicated resources to assess, repair and
test programs, applications, equipment and facilities. The Company established a
Year 2000 Program Office that  coordinated  the  preparations  for the change to
2000 with each business unit throughout the Company.

The Company's  program  involved an extensive  review of its own  operations and
scoping the work that needed to be completed to minimize any  potential  impact.
This included  reviewing the possible  effects on the Company arising out of how
third parties manage their transition to 2000. The work  demonstrated that there
were two possible key impacts:

         Internal  - the  change to 2000 could  cause  interruptions,  errors in
         calculations or delays to the Company's critical business processes via
         unexpected system or application malfunctioning.

         External  - the  impact on the  Company's  own  operations  from  third
         parties,  including  customers,  vendors,  suppliers,   regulators  and
         electronic distribution channels which may be impacted by the change to
         2000.  This  includes any  secondary or systemic  impact that may arise
         from the change to 2000 and the risk of  disruption  in the capital and
         secondary mortgage markets on which the Company is dependent.

The Company's  strategy for  addressing  Year 2000 focused on four teams,  which
together  addressed  all  aspects of the  Company's  business.  The  Information
Technology  team  addressed  all  of  the  Mainframe,   LAN  and  client  server
applications.  The End User  Computing (or Business) team addressed the business
risks within each of the operating departments, including facilities' risk. This
area of the strategy involved the greatest  concentration of embedded chips. The
Enterprise  team  addressed  the  corporate-wide  risks  posed by the Year 2000,
including business  continuity planning to be implemented by individual business
units. Finally, the Year 2000 Program Office coordinated the Company's Year 2000
readiness  efforts and was responsible for  communications,  vendor  management,
project documentation and reporting.  The Company's Year 2000 Program Office and
overall  Year 2000  Program are managed by a Year 2000  Program  Director  whose
full-time resources and  responsibilities are dedicated to this effort under the
sponsorship  of  the  President  and  Chief  Operating  Officer  and  the  Chief
Information Officer.

Throughout  all phases of the Year 2000  Program the goal of the Year 2000 teams
was to complete all required  work while  minimizing  disruption  to the current
service  delivery levels of the Company.  Central  management of the project was
executed  using  fully  dedicated  staff  with  high  levels of  subject  matter
knowledge.  In order to speed the  assessment  and  remediation  aspects  of the
mainframe and client server IT projects,  a factory philosophy was adopted using
Paragon Computer Professionals, Inc. as the primary outsourcer. Contractors were
used internally where subject matter expertise was not required.

State of Readiness.  The Company's  approach to preparing for the change to 2000
included a standard set of methods and tools,  customized  as applicable to each
team, to coordinate and drive the project to completion.  The approach consisted
of six phases:

     1.   Assessment  - Defining  each system and process to  determine if there
          are date dependencies and how to resolve them. For business continuity
          purposes, assessment included identifying event and dependency risk.

     2.   Remediation -  Implementing  the steps  identified  in the  assessment
          phase,  including  code  remediation  and  development  of contingency
          plans.

     3.   Testing -  Developing  and  implementing  test plans to  determine  if
          remediated  code  was  correct  and  assurance   testing  of  business
          continuity plans.

     4.   Implementation  -  Moving  all  approved  changes  from  testing  into
          production and execution of contingency plans as was required.

     5.   Check-Off  -  Formally   acknowledging  that  each  process  has  been
          implemented and is functioning correctly.

     6.   Clean  Management - Employing  procedures and practices to prevent the
          reintroduction of non-compliant  applications,  products and processes
          into the operating environment, once Check-Off was completed.

The  Company's  Information  Technology  and Business  Teams'  assessment of the
Company's systems and business  processes for Year 2000  vulnerability  included
substantially all hardware and software systems, embedded systems, buildings and
equipment,  and business processes. The assessment also included a review of the
Company's  dependencies  on third  parties,  including  vendors,  suppliers  and
customers.

The Company  established in its Year 2000 Program  certain key milestones and an
internal  timetable  for  the  change  to 2000 in  line  with  or  ahead  of its
regulator's suggested completion dates for core systems. These were:

     o    Assessment of substantially all systems and processes by July 31, 1998
          - Completed by target date;

     o    Remediation and internal testing of all mission critical  applications
          by December 31, 1998 - Completed by target date;

     o    End-to-end testing of all mission critical systems with material third
          parties by March 31, 1999 - Substantially  completed by July 31, 1999,
          now complete;

     o    Remediation  and testing of all non-mission  critical  systems by June
          30, 1999 - Substantially completed by target date, now complete; and

     o    clean management of all systems through 1999 - implemented  throughout
          the Company.


All  End-to-End  testing,   with  material  external  parties  and  others,  was
successfully  completed.  As of March 31, 1999, HomeSide successfully  completed
the mandatory  components of the MBA Year 2000 Readiness Test,  including Fannie
Mae,  Freddie  Mac and  Ginnie  Mae.  Optional  components  of the MBA Year 2000
Readiness Test were substantially completed by June 30, 1999.

The Company's two most critical  business  applications are its primary mortgage
servicing  software  systems:   MSP  (licensed  from  and  supported  by  Alltel
Information Services, Inc.) and ALSS (a proprietary software system supported by
the  Company).  As to  these  two  systems,  assessment,  remediation,  testing,
implementation  and check-off  were completed on time, the systems were returned
to production and clean management procedures were implemented.

The  Company's  Year 2000  Program  also  addressed  end-user  computing  issues
presented by the Year 2000 change. As to end-user  computing issues (systems and
business  processes  other than  information  technology  systems),  assessment,
remediation,  testing,  implementation  and check-off were completed on time and
clean management procedures were implemented.

Since September 30, 1999, the emphasis of the Company's Year 2000 Program was on
continued assurance testing, finalization,  refinement and testing of transition
plans,  monitoring of Year 2000  readiness  efforts by the Company's  customers,
vendors and other third  parties  with whom the Company has  relationships,  and
clean management of systems and processes.  The Company  successfully  developed
and implemented a Clean Management Strategy on a Company-wide basis.

The Company was concerned  that third parties on which the Company  relies would
not complete their Year 2000 programs on time or that Year 2000 failures by such
third parties would have a material  adverse effect on the Company's  results of
operations.  The Company  conducted  ongoing reviews of the Year 2000 efforts of
its mission critical vendors, customers and service providers. As of the date of
filing, the Company has not experienced any material disruptions in service from
any of its  vendors,  customers  or service  providers  as a result of Year 2000
issues.

The Company  conducted  ongoing  reviews of the Year 2000 efforts of its mission
critical vendors, customers and service providers through December 31, 1999. The
Company  identified a number of mission  critical  third parties whose Year 2000
failure may  reasonably  be expected  to have a material  adverse  impact on the
Company's  results of operations.  Examples of such third parties  include:  the
Company's primary software  licensor,  Alltel  Information  Services,  Inc.; the
Company's  sole provider of insurance  processing  services;  the Company's sole
provider of tax payment services; and the Company's sole provider of foreclosure
services.  Catastrophic  failure by any of these  parties  would have a material
adverse effect on the Company. The Company targeted these mission critical third
parties for particular  scrutiny  regarding their preparations for the change to
2000. That process will continue into the first quarter of 2000.

The Company was successful in negotiating  Year 2000 amendments to its contracts
with several mission critical vendors. These amendments contain  representations
and  warranties  by the vendors as to their state of  readiness to meet the Year
2000 challenge and indemnification and other remedies in favor of the Company in
the event the Company  suffered a loss  because the vendor did not  successfully
manage the change to 2000.

Transition  Planning.  Transition  planning is concerned  with  identifying  and
preparing for specific issues and risks associated with the period of October 1,
1999  through  March 31,  2000.  The  Company  has  developed  a  corporate-wide
Transition  Strategy.  The objective of the Company in transition planning is to
ensure a Company-wide  capability to manage  internal and  externally  generated
events as and when they might arise.  Transition  plans for the century rollover
and beyond were completed by September 30, 1999.

As part of the Company's  Transition planning and overall Year 2000 Program, the
Company  established a moratorium period using a scaled  implementation  plan to
restrict the introduction of minor,  significant and major changes to systems or
business processes.  The moratorium period will not impair the Company's ability
to  conduct  its  core  businesses  and meet the  needs  of its  customers.  The
Company's  Year  2000  Program  will  continue  until  the  end of  March  2000.
Activities planned for the first quarter of 2000 include:

     o    Monitoring   and   verification    activities   surrounding   business
          information systems;

     o    Implementation  of  maintenance  programs  associated  with the system
          changes made to manage the date change to 2000;

     o    Working with  customers and  suppliers  regarding any impacts they may
          have sustained as a result of the date change to 2000; and

     o    Completing  a  formal  post-implementation  review  of the  Year  2000
          Program to assess achievements and lessons learned.

Risks.  The  Company's  risk  management  office  is  actively  involved  in the
Company's  Year 2000 Program.  The most  reasonably  likely worst case Year 2000
scenario,   disregarding  the  Company's  remediation  efforts  and  contingency
planning,  is: (i) a failure in its loan servicing  software and/or systems,  or
(ii) a failure by one of the  Company's key third party  providers.  Either such
failure would result in material disruption in the Company's operations possibly
preventing it from  discharging its contractual  obligations to service mortgage
loans in an accurate and timely  fashion.  The  consequences  of such disruption
could  include,  among other things,  revocation  of the Company's  status as an
FHA/VA approved  lender/servicer  or Ginnie Mae/Fannie  Mae/Freddie Mac approved
seller/servicer,  incorrect processing and/or reporting of payments to consumers
and investors,  a material loss of revenue,  and  litigation  with third parties
alleging losses related to servicing failure.

While  working to ensure that the  Company's  primary  objective  of business as
usual  before,  during and through 2000 is  achieved,  there can be no guarantee
that its Year 2000 program will be  successful  in all respects or that the date
change  from  1999 to 2000 or Leap  Day  2000  will not  materially  affect  the
Company's business in some form.

Contingency Planning. The Company's Year 2000 Program is based on the assumption
that 100% impact coverage is neither feasible nor practical. It is possible that
the  Company or third  parties on which the Company  depends may have  unplanned
system  difficulties  during the  transition  through  2000 or Leap Day, or that
third  parties  may not  successfully  manage  the  change  to 2000 or Leap Day;
therefore,  an  integral  part  of  the  Company's  Year  2000  Program  is  the
development  of  contingency  plans in  anticipation  of systems or third  party
failure.

These contingency plans have been developed for individual applications, systems
and business  processes.  Individual  departments within the Company,  including
information  technology,  acting under the supervision and direction of the Year
2000 Program  Enterprise  team, have (a) identified  applicable Year 2000 events
and threats,  (b) considered  the  likelihood of occurrence,  (c) determined the
severity of impact of such events and threats,  and (d) created  preventive  and
continuity  plans to address such events and threats.  Although the  contingency
plans vary by application,  system and business  process,  each of the Company's
contingency  plans include:  identification  of the Company's  systems and third
party risks that the plan  addresses;  an analysis of  strategies  and available
resources to restore and  continue  operations;  and a recovery  and  continuity
program that  identifies  participants,  processes,  and  significant  resources
required. Contingency plans include: identifying alternate providers and locking
them in  contractually  as  applicable;  securing  redundant  telecommunications
resources;  stockpiling of critical  supplies;  developing  manual procedures to
replace automated  procedures;  altering delivery  schedules for certain reports
and services to avoid the rollover period. Alternate providers are not available
for those key third parties  identified above as the Company's sole providers of
certain services.  As to those providers,  the Company has in each case reviewed
and approved the Year 2000 contingency plans adopted by those third parties.  In
the event of a failure in those third parties' contingency plans, the Company is
prepared,  as an  additional  contingency,  to terminate  its contract  with any
non-compliant provider and take over the performance of those services in-house.
In that regard,  it should be noted that the Company retains control of the data
essential to the provision of these services.

The Company's contingency plans have been reviewed and approved by the Company's
Program Office and executive management and, where possible,  tested.  Assurance
testing of the Company's  continuity  plans was completed by September 30, 1999.
Given the  potential  scope of Year 2000  events,  it is possible  that  despite
considerable  planning,  the Company's  business  continuity  plans for the date
change to 2000 may only  assist in the  reduction  of the  degree of  disruption
rather than its avoidance.  However, the Company is encouraged by the absence of
any material  adverse impacts by the century  rollover and no contingency  plans
have been invoked to date.

Cost of Year 2000 Efforts.  As described above, the Company conducted a thorough
Year 2000  program,  covering  all  aspects of its  business,  to ensure that it
successfully  managed the change to 2000. The Company presently  estimates these
costs will total  approximately  $12.4 million,  less than the $13.5 million the
Company previously estimated.

Year 2000 costs are based on  management's  best  estimates,  which were derived
utilizing  numerous   assumptions  of  future  events  including  the  continued
availability  of certain  resources,  third party  modification  plans and other
factors.  However,  there  can be no  guarantee  that  these  estimates  will be
achieved and actual  results  could  differ  materially  from those  plans.  The
Company does not  separately  track the indirect costs incurred in its Year 2000
program.

Through December 31, 1999, the Company had expended  approximately $12.0 million
of its total Year 2000 budget. The Company incurred significant  expenditures in
the fourth calendar quarter of 1999 associated with proactive  communications to
its customers.  The Company will continue to incur expenditures  associated with
employee retention efforts, transition planning and maintenance of its Year 2000
Program Office through March 31, 2000. The Company does not foresee any expenses
not provided for in the current budget, unless there are unanticipated Year 2000
problems.

The Company  expensed  its  remediation  costs as they were  incurred,  with the
exception of new hardware and software  purchases,  which were capitalized.  The
source of funds for Year 2000  remediation was operating  income of the Company.
The percentage of the Company's  information  technology  budget devoted to Year
2000 efforts in the quarter ended December 31, 1999 was approximately  5.0%. The
Company is unable to readily  determine the cost of replacement of non-compliant
systems  that  are  being  replaced  in the  ordinary  course  of  business.  No
significant  information technology projects have been deferred due to Year 2000
efforts.

The Company's  original Year 2000 budget of $13.5 million and revised  budget of
$12.4 million were each based on  management's  best  estimates and did not take
into  account  any  Year  2000-related  claims  for loss or  damage  that may be
asserted against the Company by third parties.

The foregoing  disclosure is furnished in response to and in compliance with the
Statement  of the  Commission  Regarding  Disclosure  of Year  2000  Issues  and
Consequences by Public Companies, Investment Advisers, Investment Companies, and
Municipal Securities Issuers, Securities Act Rel. No. 33-7448 (July 30, 1998).

Quantitative and Qualitative Market Risk

There have been no material  changes in the Company's market risk from September
30, 1999. For  information  regarding the Company's  market risk,  refer to Form
10-K for the fiscal year ended  September  30,  1999 of HomeSide  International,
Inc.

                           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 document is filed as a part of this Report:

Number            Description

27                Financial Data Schedule

 (b)   Reports on form 8-K

HomeSide  filed no reports on Form 8-K during the  quarter  ended  December  31,
1999.

                                   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, 2000        By:   _/s/_____________________
                                     Joe K. Pickett
                               Chairman of the Board, Chief Executive Officer
                                     and Director (Principal Executive Officer)

Date: February 14, 2000        By:  _/s/______________________
                                        W. Blake Wilson
                               Executive Vice President, Chief Financial Officer
                                    (Principal Financial and Accounting Officer)