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

                                    FORM 10-Q

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

     For the quarterly period ended June 30, 1998

                                       OR

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

                           Commission File No. 1-12655

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

          Delaware                                      59-3387041
(State or other jurisdiction of          (I.R.S. Employer Identification No.)
 incorporation or organization) 

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

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



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



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

           Class                                          Outstanding at 
                                                         August 14, 1998

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


<PAGE>

                              FINANCIAL INFORMATION

ITEM 1.  Financial Statements
<TABLE>
<CAPTION>
                          HOMESIDE INTERNATIONAL, INC.
                           CONSOLIDATED BALANCE SHEETS

                    (Dollars in Thousands, Except Share Data)


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

      Cash and cash equivalents                                                           $       17,387         $       32,113
      Mortgage loans held for sale, net                                                        1,324,546              1,292,403
      Mortgage servicing rights, net                                                           1,988,085              1,781,134
      Accounts receivable, net                                                                   288,953                227,294
      Early pool buyout advances                                                                 523,139                374,097
      Premises and equipment, net                                                                 36,909                 41,982
      Goodwill                                                                                   713,399                  8,870
      Other assets                                                                               107,429                125,710
                                                                                      -------------------      -------------------
      Total Assets                                                                        $    4,999,847         $    3,883,603
                                                                                      ===================      ===================

      LIABILITIES AND STOCKHOLDERS' EQUITY

      Notes payable                                                                       $   2,025,400          $    2,074,956
      Accounts payable and accrued liabilities                                                  223,211                 143,870
      Deferred income taxes                                                                     160,888                 175,178
      Long-term debt                                                                          1,339,733                 900,466
                                                                                      -------------------      -------------------
      Total Liabilities                                                                   $   3,749,232          $    3,294,470
                                                                                      -------------------      -------------------

      Common stock:
           Common stock,  $.01 par  value,  100  shares  authorized  and 1 share
               issued  and  outstanding  after the  merger,  119,610,000  shares
               authorized and 43,394,861 shares issued and outstanding before the 
               merger                                                                             -                         434
           Class C non-voting common stock, $1.00 par value, 195,000 shares
               authorized, and 0 shares issued and outstanding after the merger,
               97,138 shares issued and outstanding before the merger                             -                          97
      Additional paid-in capital                                                              1,230,618                 476,846
      Retained earnings                                                                          19,997                 111,756
                                                                                      -------------------      -------------------
      Total Stockholder's Equity                                                              1,250,615                 589,133
                                                                                      -------------------      -------------------
      Total Liabilities and Stockholder's Equity                                          $   4,999,847          $    3,883,603
                                                                                      ===================      ===================
</TABLE>

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


<PAGE>
<TABLE>
<CAPTION>


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

                             (Dollars in Thousands)


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

REVENUES:

Mortgage servicing fees                                     $118,334            $ 99,824               $182,601        $195,695
Amortization of mortgage servicing rights                   (74,476)             (48,206)              (111,842)        (98,296)
                                                    -----------------    -----------------    -------------------    ---------------
    Net servicing revenue                                    43,858               51,618                 70,759          97,399
    
Interest income                                              39,003               19,242                 57,293          40,519
Interest expense                                            (29,793)             (22,104)               (45,246)        (48,601)
                                                    -----------------    -----------------    -------------------    ---------------
    Net interest revenue                                      9,210               (2,862)                12,047          (8,082)

Net mortgage origination revenue                             34,341               17,926                 48,610          40,395
Other income                                                  8,783                  776                  9,403             917
                                                    -----------------    -----------------    -------------------    ---------------
    Total Revenues                                           96,192               67,458                140,819         130,629


EXPENSES:

Salaries and employee benefits                               29,381               19,736                 44,011          39,405    
Occupancy and equipment                                       5,006                3,806                  7,400           7,309
Servicing losses on investor-owned loans
   and foreclosure-related expenses                           8,387                4,752                 10,210           9,733
Goodwill amortization                                         8,919                  164                 13,860             316
Other expenses                                               15,498                9,273                 23,694          21,256
                                                    -----------------    -----------------    -------------------    ---------------
    Total Expenses                                           67,191               37,731                 99,175          78,019
Income before income taxes and extraordinary  loss           29,001               29,727                 41,644          52,610
Income tax expense                                           14,789               11,594                 21,647          20,344
                                                    -----------------    -----------------    -------------------    ---------------
Income before extraordinary loss                             14,212               18,133                 19,997          32,266
Extraordinary loss                                              -                    -                      -             6,440
                                                    -----------------    -----------------    -------------------    ---------------
Net income                                                 $ 14,212             $ 18,133                $19,997         $25,826
                                                    =================    =================    ===================    ===============

</TABLE>

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

<PAGE>
<TABLE>
<CAPTION>

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

                             (Dollars in Thousands)

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

Net income                                                       $14,212            $18,133           $ 19,997           $25,826
                                                                                                            
Adjustments to reconcile net income to net cash provided
by operating activities:
  Amortization of mortgage servicing rights                       74,476             48,206            111,842            98,296
  Depreciation and amortization                                   10,340              2,608             15,685             5,363
  Servicing losses on investor-owned loans                         3,954              3,183              5,147             3,913
  Deferred income tax expense                                     12,080             11,594             18,939            16,044
  Origination and purchase of loans held for sale, net of        273,004             (1,115)           (85,891)          294,840
    repayments
  Change in accounts receivable                                   32,633            (46,235)           (23,829)          (31,378)
  Change in other assets and accounts payable and accrued       
    liabilities                                                  (41,177)            (5,915)            82,885             3,167
                                                              -------------      -------------    ----------------     -------------
Net cash provided by operating activities                        379,522             30,459            144,775           416,071

CASH FLOWS USED IN INVESTING ACTIVITIES:

Purchase of premises and equipment, net                           (6,081)            (3,763)            (9,963)           (5,337)
Acquisition of mortgage servicing rights                        (137,442)          (120,060)          (299,701)         (251,501)
Net proceeds from (purchases of) risk management contracts       128,930            (29,645)           143,115           (83,151)
Purchases of early pool buyout advances                          (74,230)              -              (149,140)             -
Acquisition of Banc One Mortgage servicing assets               (201,000)              -              (201,000)             -
                                                              -------------      -------------    ----------------     -------------
Net cash used in investing activities                           (289,823)          (153,468)          (516,689)         (339,989)

CASH FLOWS (USED IN) PROVIDED BY FINANCING ACTIVITIES:

Net repayments to banks                                         (433,347)          (161,069)         (49,556)           (353,379)
Issuance of notes payable                                        350,000                             410,000             250,000
                                                                                    250,000
Payment of debt issue costs                                       (2,888)            (1,687)          (3,096)             (3,487)
Repayment of long term debt                                         (122)              (151)            (160)            (70,301)
Proceeds from issuance of common stock                                -                  -                -              116,677
                                                              -------------      -------------    ----------------     -------------
Net cash (used in) provided by financing activities              (86,357)            87,093          357,188             (60,490)
Net increase (decrease) in cash and cash equivalents               3,342            (35,916)         (14,726)             15,592
Cash and cash equivalents at beginning of period                  14,045             52,691           32,113               1,183
                                                              -------------      -------------    ----------------     -------------
Cash and cash equivalents at end of period                       $17,387            $16,775          $17,387             $16,775
                                                              =============      =============    ================     =============
Supplemental disclosure of cash flow information:
Interest paid                                                    $35,002            $25,932          $48,605             $49,364
Income taxes paid                                                 $2,657                 $2           $2,657                  $2

</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.

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

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

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

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

2.  MORTGAGE SERVICING RIGHTS

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

Balance, February 10, 1998                   $1,781,134
Additions                                       423,945
Deferred hedge gain                            (105,152)
Amortization                                   (111,842)
                                         ----------------

Balance, June 30, 1998                       $1,988,085
                                         ================


3.  NOTES PAYABLE

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

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

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

4.  LONG-TERM DEBT

      On May 14,  1996,  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, commencing on November 15, 1996.
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
the maintenance of certain net worth and ratio  requirements.  In addition,  the
Parent  Notes are  secured by a second  priority  pledge of the common  stock of
HomeSide  Lending.  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 June 30, 1998 is $130.0  million.  The balance of the
Parent Notes at June 30, 1998,  including  the fair value  adjustment  resulting
from the merger with the National, was $153.4 million.

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

Issue Date          Outstanding Balance   Coupon Rate       Maturity Date

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

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

          In connection with the acquisition of BancBoston Mortgage Corporation,
HomeSide  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.  A purchase  accounting  premium was
recorded in  connection  with HomeSide  assuming the mortgage note payable.  The
balance of the  mortgage  payable  at June 30,  1998,  including  the fair value
adjustments resulting from the merger with the National, was $24.5 million.

5.  ACQUISITIONS

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

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

6.    NEW ACCOUNTING STANDARD

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


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

General

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

       HomeSide  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 the
existing BankBoston and Banc One relationships.

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

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

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

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

      The  following   information  regarding  loan  production  activities  for
HomeSide Lending is presented to aid in understanding  the results of operations
and  financial  condition  of HomeSide for the three months ended June 30, 1998,
the period from February 11, 1998 to June 30, 1998 and the predecessor company's
three and six months ended May 31, 1997 (in millions):
<TABLE>
<CAPTION>
                                                                  Predecessor                              Predecessor
                                             For the Three       For the Three     For the Period          For the Six
                                              Months Ended       Months Ended      February 11, 1998       Months Ended
                                             June 30, 1998       May 31, 1997      to June 30, 1998        May 31, 1997
                                             -------------       ------------      ----------------        ------------
<S>                                          <C>                 <C>               <C>                     <C>
                                                                                    
Correspondent                                   $    4,264          $   3,222          $    6,589           $    6,243
Co-issue                                             1,139              1,191               2,627                3,801
Broker                                                 709                389               1,081                  689
                                               ------------        -----------         -----------         ------------
  Total wholesale                                    6,112              4,802              10,297               10,733
Direct                                                 255                 69                 352                  203
                                               ------------        -----------         -----------         ------------
  Total production                                   6,367              4,871              10,649               10,936
Bulk acquisitions                                   17,143                501              17,145                  501
                                               ------------        -----------         -----------         ------------
  Total production and acquisitions              $  23,510          $   5,372           $  27,794            $  11,437
                                               ============        ===========         ===========         ============
</TABLE>


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

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

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

   Servicing Portfolio

      Management  believes  that HomeSide  Lending is one of the most  efficient
mortgage  servicers in the industry based on its servicing cost per loan and the
number of loans serviced per employee.  The servicing  operation makes extensive
use  of  state-of-the-art   technology,   process   re-engineering  and  expense
management. With a portfolio size of $116 billion, HomeSide Lending services the
loans of approximately 1.4 million  homeowners from across the United States and
is committed to protecting the value of this important  asset by a sophisticated
risk management strategy. HomeSide Lending anticipates its low cost of servicing
loans will continue to maximize the bottom-line  impact of its growing servicing
portfolio.  HomeSide  Lending's  focus on  efficient  and low cost  processes is
pursued  through  the  selective  use of  automation  as well  as the  strategic
outsourcing   of  selected   servicing   functions  and  effective   control  of
delinquencies and foreclosures.

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

<TABLE>
<CAPTION>
                                                                  Predecessor                              Predecessor
                                             For the Three       For the Three       For the Period        For the Six
                                              Months Ended       Months Ended        February 11, 1998     Months Ended
                                             June 30, 1998       May 31, 1997        to June 30, 1998      May 31, 1997
                                             -------------       ------------        ----------------      ------------
<S>                                          <C>                 <C>                 <C>                   <C>  
Balance at beginning of period                   $  99,918          $  90,192           $  99,956          $ 88,706
   Additions                                        23,510              5,372              27,794            11,437
   Scheduled amortization                              663                531                 983             1,107
   Prepayments                                       6,378              2,144              10,211             3,819
   Foreclosures                                        385                171                 514               312
   Sales of servicing                                  201                 81                 241             2,268(a)
                                               ------------        -----------         -----------        -------------
       Total reductions                              7,627              2,927              11,949             7,506
                                               ------------        -----------         -----------        -------------
Balance at end of period                          $115,801          $  92,637            $115,801          $ 92,637
                                               ============        ===========         ===========        =============
</TABLE>

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

      The number of loans  serviced at June 30, 1998 was  1,424,256  compared to
1,124,911 at May 31, 1997.  HomeSide Lending's strategy is to build its mortgage
servicing   portfolio  by   concentrating  on  variable  cost  loan  origination
strategies,  and as a result, benefit from improved economies of scale. A key to
HomeSide Lending's future growth is the proprietary servicing software purchased
from Barnett.  This system will allow  HomeSide  Lending to double the number of
loans  serviced on a single  system.  Over half of the  servicing  portfolio  is
serviced on the proprietary  system. The transfer of the remaining  portfolio is
expected to occur by the end of calendar year 1998.

Results of Operations

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

   Summary

      HomeSide's net income,  excluding goodwill amortization,  increased 26% to
$23.1 million for the three months ended June 30, 1998 compared to $18.3 million
for the  predecessor  three  months  ended May 31,  1997.  Net income  after the
goodwill  amortization  from the acquisition of HomeSide by the National for the
three months ended June 30, 1998 was $14.2 million. Total revenues for the three
months ended June 30, 1998 were $96.2 million  compared to $67.5 million for the
predecessor  three  months  ended May 31,  1997.  The  increases  in net income,
excluding  goodwill  amortization,  and revenues for the three months ended June
30,  1998  compared  to the  predecessor  three  months  ended May 31, 1997 were
primarily  attributable to increases in net mortgage origination revenue and net
interest revenue,  partially offset by a decrease in net servicing revenue.  Net
mortgage  origination  revenue increased due to loan production volume increases
and increases in gains from secondary marketing activities. Net interest revenue
increased  due to increases in net  interest  earned on mortgage  loans held for
sale and  escrow  deposits  and as a result  of  reduced  borrowing  costs  from
improved  credit  ratings and the issuance of medium-term  notes.  Net servicing
revenue  decreased  primarily due to increased  mortgage  prepayment  speeds and
amortization  expense as a result of declining  interest  rates.  Total expenses
increased as a result of increases in production volume, amortization expense of
$8.9  million  related  to the  goodwill  associated  with the  merger  with the
National  (see Note 1), and expenses  associated  with the Banc One  acquisition
(see Note 5).

    Net Servicing Revenue

      Net  servicing  revenue was $43.9  million for the three months ended June
30, 1998  compared to $51.6 million for the  predecessor  three months ended May
31,  1997.  Net  servicing  revenue is  comprised  of mortgage  servicing  fees,
ancillary servicing revenue, and amortization of mortgage servicing rights.

      Mortgage  servicing fees totaled $118.3 million for the three months ended
June 30, 1998 compared to $99.8 million for the  predecessor  three months ended
May 31, 1997. The servicing  portfolio increased $23.2 billion to $115.8 billion
at June 30, 1998 compared to $92.6  billion at May 31, 1997, a 25%  increase.  A
significant portion of this portfolio growth was due to the purchase of Banc One
Mortgage's $16.6 billion servicing  portfolio during the three months ended June
30, 1998. HomeSide's weighted average interest rate of the mortgage loans in the
servicing  portfolio  was  7.76% and  7.90% at June 30,  1998 and May 31,  1997,
respectively.  The weighted average servicing fee,  including  ancillary income,
for the servicing  portfolio was 0.450% for the three months ended June 30, 1998
compared to 0.436% for the  predecessor  three months  ended May 31,  1997.  The
increase in the weighted  average  servicing  fee was due to growth of ancillary
revenues including late fees and other mortgage-related  products.  Amortization
expense was $74.5  million for the three months ended June 30, 1998  compared to
$48.2 million for the predecessor three months ended May 31, 1997.  Amortization
expense  increased  mainly as a result of a higher  average  balance of mortgage
servicing rights and a decrease of 79 basis points in average mortgage  interest
rates from 8.01% at May 31, 1997 to 7.22% at June 30, 1998.

   Net Interest Revenue

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

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

      Overall  borrowing  costs also fluctuate  with changes in interest  rates.
Currently, the interest expense HomeSide 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 $9.2 million for the three months ended June
30, 1998 compared to ($2.9) million for the  predecessor  three months ended May
31,  1997.  Increases  in net  interest  revenue  were due to  increases  in net
interest earned on mortgage loans held for sale and escrow deposits. The average
balance of mortgage  loans held for sale  increased  30% to $1.3 billion for the
three  months ended June 30, 1998 from $1.0  billion for the  predecessor  three
months ended May 31, 1997. The average escrow deposits balance  increased 67% to
$2.5  billion for the three months ended June 30, 1998 from $1.5 billion for the
predecessor  three months ended May 31, 1997. The principal  balances of prepaid
mortgage loans are  accumulated in escrow  accounts  before they are remitted to
investors.  During  periods of declining  interest  rates,  prepayments,  escrow
balances and the related earnings increase. Lower funding rates obtained through
improved credit ratings,  the issue of medium-term  notes and the adoption of an
early pool buyout program also  contributed to increases in net interest income.
HomeSide's  primary operating  subsidiary,  HomeSide Lending,  Inc. has issued a
total of $1.2 billion of  medium-term  notes to the public  market at an average
borrowing  rate of 5.993% at June 30, 1998.  The proceeds  were used to pay down
existing  bank debt,  increasing  HomeSide's  borrowing  capacity.  An immediate
benefit of this increased borrowing capacity was the initiation of an early pool
buyout program,  which involves the purchase of delinquent government loans from
pools  early in the  foreclosure  process,  thereby  reducing  the  unreimbursed
interest expense that HomeSide incurs.

  Net Mortgage Origination Revenue

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

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

   Other Income

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

   Salaries and Employee Benefits

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

   Occupancy and Equipment Expense

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

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

      Servicing  losses on  investor-owned  loans represent  anticipated  losses
primarily  attributable  to  servicing  FHA and VA loans  for  investors.  These
amounts   include   actual   losses   for  the  final   disposition   of  loans,
non-recoverable  foreclosure costs,  accrued interest for which payment has been
curtailed and estimates for potential losses based on HomeSide's experience as a
servicer of government loans. The servicing losses on  investor-owned  loans and
foreclosure-related  expenses  totaled  $8.4  million for the three months ended
June 30, 1998  compared to $4.8 million for the  predecessor  three months ended
May  31,   1997.   The   increase   was   primarily   due  to  an   increase  in
foreclosure-related expenses.

      Included  in the balance of accounts  payable and accrued  liabilities  at
June 30,  1998 is a reserve for  estimated  servicing  losses on  investor-owned
loans of $21.7 million.  The reserve has been  established for potential  losses
related to the  mortgage  servicing  portfolio.  Increases  to the  reserve  are
charged to earnings as servicing losses on investor-owned  loans. The reserve is
decreased  for  actual  losses  incurred  related  to  the  mortgage   servicing
portfolio.  HomeSide'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)

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

          Foreclosures pending                       0.75%             0.68%
                                                ===============   ==============

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

   Other Expenses and Goodwill Amortization

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

      Other expenses,  excluding  goodwill  amortization from the acquisition of
HomeSide by National  Australia  Bank,  were $15.5  million for the three months
ended June 30, 1998  compared to $9.3 million for the  predecessor  three months
ended May 31, 1997. The increase in other expenses was primarily due to expenses
associated with higher  production  volumes and the growing  mortgage  servicing
portfolio.  Other expenses,  including goodwill amortization of $8.9 million and
$0.2  million,  respectively,  for the three  months ended June 30, 1998 and the
predecessor  six months ended May 31, 1997 were $24.4  million and $9.5 million,
respectively.

   Income Tax Expense

      HomeSide's income tax expense was $14.8 million for the three months ended
June 30, 1998 compared to $11.6 million for the  predecessor  three months ended
May 31, 1997. The effective income tax rates for the three months ended June 30,
1998 and the  predecessor  three  months  ended  May 31,  1997 were 51% and 39%,
respectively. The increase was due to the tax effects of goodwill as a result of
the merger with the National.

Results of Operations

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

   Summary

      HomeSide's  net  income,   excluding  goodwill   amortization  and  before
extraordinary loss,  increased to $33.9 million for the period from February 11,
1998 to June 30, 1998 compared to $32.6 million for the  predecessor  six months
ended May 31, 1997. Net income after goodwill  amortization from the acquisition
of HomeSide by the  National  for the period from  February 11, 1998 to June 30,
1998 was $20.0 million. Net income for the six months ended May 31, 1997 totaled
$25.8 million after an extraordinary loss on the early extinguishment of debt of
$6.4 million,  net of tax.  Total revenues for the period from February 11, 1998
to June 30, 1998 were $140.8 million compared $130.6 million for the predecessor
six months ended May 31, 1997.  The increases in net income and revenues for the
period from February 11, 1998 to June 30, 1998 compared to the  predecessor  six
months  ended May 31,  1997 were  primarily  attributable  to  increases  in net
mortgage  origination  revenue and net interest  revenue,  partially offset by a
decrease in net servicing revenue.  Net mortgage  origination  revenue increased
due to loan  production  volume  increases and increases in secondary  marketing
gains. Net interest revenue  increased due to an increase in net interest earned
on mortgage  loans held for sale and escrow  deposits and as a result of reduced
borrowing  costs from improved  credit  ratings and the issuance of  medium-term
notes.  Net servicing  revenue  decreased  primarily  due to increased  mortgage
prepayment  speeds and  amortization  expense as a result of declining  interest
rates. Total expenses increased primarily as a result of increases in production
volume  and  amortization  expense  of $13.9  million  related  to the  goodwill
associated  with the  merger  with the  National  (see  Note  1),  and  expenses
associated with the Banc One acquisition (see Note 5).

   Net Servicing Revenue

      Net  servicing  revenue was $70.8 million for the period from February 11,
1998 to June 30, 1998 compared to $97.4 million for the  predecessor  six months
ended May 31, 1997.  Net  servicing  revenue is comprised of mortgage  servicing
fees,  ancillary  servicing  revenue,  and  amortization  of mortgage  servicing
rights.

      Mortgage  servicing  fees  totaled  $182.6  million  for the  period  from
February  11,  1998  to  June  30,  1998  compared  to  $195.7  million  for the
predecessor  six months ended May 31, 1997.  The servicing  portfolio  increased
$23.2  billion to $115.8  billion at June 30, 1998  compared to $92.6 billion at
May 31, 1997, a 25% increase. A significant portion of this portfolio growth was
due to the purchase of Banc One  Mortgage's  $16.6 billion  servicing  portfolio
during the period from February 11, 1998 to June 30, 1998.  HomeSide's  weighted
average interest rate of the mortgage loans in the servicing portfolio was 7.76%
and 7.90% at June 30, 1998 and May 31, 1997, respectively.  The weighted average
servicing  fee,  including  ancillary  income,  for the servicing  portfolio was
0.456% for the period from February 11, 1998 to June 30, 1998 compared to 0.430%
for the  predecessor six months ended May 31, 1997. The increase in the weighted
average  servicing fee was due to growth of ancillary  revenues  including  late
fees and  other  mortgage-related  products.  Amortization  expense  was  $111.8
million for the period from February 11, 1998 to June 30, 1998 compared to $98.3
million for the predecessor six months ended May 31, 1997.  Amortization expense
increased  mainly as a result of a higher average balance of mortgage  servicing
rights and a decrease of 79 basis points in average mortgage interest rates from
8.01% at May 31, 1997 to 7.22% at June 30, 1998.

   Net Interest Revenue

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

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

      Overall  borrowing  costs also fluctuate  with changes in interest  rates.
Currently, the interest expense HomeSide 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  $12.0 million for the period from February
11, 1998 to June 30, 1998  compared to ($8.1)  million for the  predecessor  six
months  ended  May 31,  1997.  Increases  in net  interest  revenue  were due to
increases  in net  interest  earned on  mortgage  loans held for sale and escrow
deposits.  The principal  balances of prepaid  mortgage loans are accumulated in
escrow  accounts  before  they are  remitted  to  investors.  During  periods of
declining interest rates, prepayments,  escrow balances and the related earnings
increase.  Lower funding rates obtained  through  improved credit  ratings,  the
issue of medium-term notes and the adoption of an early pool buyout program also
contributed to increases in net interest income.  HomeSide's  primary  operating
subsidiary,  HomeSide  Lending,  Inc.  has  issued  a total of $1.2  billion  of
medium-term notes to the public market at an average borrowing rate of 5.993% at
June 30, 1998. The proceeds were used to pay down existing bank debt, increasing
HomeSide's borrowing capacity.  An immediate benefit of this increased borrowing
capacity was the initiation of an early pool buyout program,  which involves the
purchase of  delinquent  government  loans from pools  early in the  foreclosure
process,  thereby  reducing the  unreimbursed  interest  expense  that  HomeSide
incurs.

   Net Mortgage Origination Revenue

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

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

   Other Income

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

   Salaries and Employee Benefits

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

   Occupancy and Equipment Expense

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

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

      Servicing  losses on  investor-owned  loans represent  anticipated  losses
primarily  attributable  to  servicing  FHA and VA loans  for  investors.  These
amounts   include   actual   losses   for  the  final   disposition   of  loans,
non-recoverable  foreclosure costs,  accrued interest for which payment has been
curtailed and estimates for potential losses based on HomeSide's experience as a
servicer of  government  loans.  Servicing  losses on  investor-owned  loans and
foreclosure-related  expenses totaled $10.2 million for the period from February
11, 1998 to June 30,  1998  compared to $9.7  million  for the  predecessor  six
months ended May 31, 1997.  The  increase  was  primarily  due to an increase in
foreclosure-related expenses.

      Included  in the balance of accounts  payable and accrued  liabilities  at
June 30,  1998 is a reserve for  estimated  servicing  losses on  investor-owned
loans of $21.7 million.  The reserve has been  established for potential  losses
related to the  mortgage  servicing  portfolio.  Increases  to the  reserve  are
charged to earnings as servicing losses on investor-owned  loans. The reserve is
decreased  for  actual  losses  incurred  related  to  the  mortgage   servicing
portfolio.  HomeSide'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.



<PAGE>


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

                        Servicing Portfolio Delinquencies
                             (percent by loan count)

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

          Foreclosures pending                    0.75%                0.68%
                                              ===============    ===============


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

Other Expenses and Goodwill Amortization

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

      Other expenses,  excluding  goodwill  amortization from the acquisition of
HomeSide  by National  Australia  Bank,  were $23.7  million for the period from
February 11, 1998 to June 30, 1998 compared to $21.3 million the predecessor six
months ended May 31, 1997. The increase was primarily due to expenses associated
with  the  growing  mortgage  servicing  portfolio.  Other  expenses,  including
goodwill amortization of $13.9 million and $0.3 million,  respectively,  for the
period from  February 11, 1998 to June 30, 1998 and the  predecessor  six months
ended May 31, 1997 were $37.6 million and $21.6 million, respectively.

   Income Tax Expense

      HomeSide's  income tax  expense  was $21.6  million  for the  period  from
February 11, 1998 to June 30, 1998 compared to $20.3 million for the predecessor
six months ended May 31,  1997.  The  effective  income tax rates for the period
from February 11, 1998 to June 30, 1998 and the predecessor six months ended May
31, 1997 were 52% and 39%, respectively. The increase was due to the tax effects
of goodwill as a result of the merger with the National.

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 primarily 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  period  from  February  11,  1998 to June 30,  1998,  HomeSide
utilized options on U.S. Treasury bond futures and U.S. Treasury bond futures to
protect a  significant  portion of the market  value of its  mortgage  servicing
portfolio  from a  decline  in  value.  The risk  management  contracts  used by
HomeSide  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.  However,  in periods of rising interest rates,  the
increase in values of mortgage servicing rights may outpace the decline in value
of the options  included in the hedge position,  because the loss on the options
is limited to the premium paid.

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


Liquidity and Capital Resources

      The  Company's  principal  financing  needs  are  the  financing  of  loan
origination  activities and the investment in mortgage servicing rights. To meet
these  needs,  the  Company  currently  utilizes  funding  from  an  independent
syndicate   of   banks,   including   a   warehouse   credit   facility   and  a
servicing-related  facility,  medium-term  notes and cash flow from  operations.
HomeSide  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 three months ended June 30, 1998
and the period from  February 11, 1998 to June 30, 1998 were $379.5  million and
$144.8  million,   respectively.   Net  cash  provided  by  operations  for  the
predecessor  three and six  months  ended May 31,  1997 were $30.5  million  and
$416.1  million,  respectively.  The primary uses of cash in operations  were to
fund loan  originations  and pay  corporate  expenses.  These  uses of cash were
offset by cash  provided  from  servicing  fee income,  loan sales and principal
repayments.  Cash  flows  from loan  originations  are  dependent  upon  current
economic  conditions  and the level of long-term  interest  rates.  Decreases in
long-term  interest rates generally result in higher loan refinancing  activity,
which results in higher cash demands to meet increased loan  production  levels.
Higher cash demands to meet increased loan  production  levels are primarily met
through borrowings and loan sales.

      Investing

    Net cash used in  investing  activities  for the three months ended June 30,
1998 and the period from February 11, 1998 to June 30, 1998 were $289.8  million
and $516.7 million,  respectively. Net cash used in investing activities for the
predecessor  three and six months  ended May 31,  1997 were  $153.5  million and
$340.0  million,  respectively.  Cash used in investing  activities  was for the
purchase and  origination  of mortgage  servicing  rights,  the purchase of risk
management contracts and for funding the early pool buyout program. Other assets
increased $42.3 million to $107.4 million at June 30, 1998 from $65.1 million at
May 31, 1997  primarily as a result of a increase in  HomeSide's  loans held for
investment which include  reinstated early pool buyout loans.  Early pool buyout
advances  totaled  $523.1  million  at June 30,  1998.  Future  uses of cash for
investing  activities will be dependent on the mortgage  origination  market and
HomeSide'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 used in  financing  activities  for the three months ended June 30,
1998 was $86.4 million. Net cash provided by financing activities for the period
from February 11, 1998 to June 30, 1998 was $357.2 million. Net cash provided by
financing  activities  for the  predecessor  three months ended May 31, 1997 was
$87.1 million, and net cash used in financing activities for the predecessor six
months ended May 31, 1997 was $60.5  million.  Cash was provided by the issuance
of medium-term  notes during the periods and used to repay borrowings from banks
on HomeSide's line of credit and pay debt issue costs.  In addition,  during the
predecessor  six months ended May 31, 1997,  HomeSide  issued $116.7  million in
common  stock and used $70.3  million of  proceeds  from the  issuance  to repay
long-term debt.

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

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

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

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

     1.   Assessment  - Defining  each system and process to  determine if there
          are date dependencies and how to resolve them.

     2.   Remediation -  Implementing  the steps  identified  in the  assessment
          phase to repair date errors.  

     3.   Testing -  Developing  and  implementing  test scripts to determine if
          remediated code is correct.

     4.   Implementation  -  Moving  all  approved  changes  from  testing  into
          production.

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

     6.   Clean  Management - Employing  procedures and practices to prevent the
          reintroduction of non-compliant  applications,  products and processes
          into the operating  environment,  once Year 2000  compliance  has been
          achieved.

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

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

     Assessment  of  substantially  all systems and  processes by July 31, 1998;
     
     Remediation  and  internal   testing  of  mission   critical   applications
     substantially completed by December 31, 1998;

     End-to-end testing of mission critical systems  substantially  completed by
     March 31, 1999; and 

     Remediation and testing of all systems through 1999.


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

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

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

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

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

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

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

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

                           PART II - OTHER INFORMATION

ITEM 1.  Legal Proceedings

      HomeSide 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:

         Number   Description
         10.1     Asset Purchase Agreement dated April 1, 1998 between  HomeSide
                  Lending, Inc. and  Banc One  Corporation and Banc One Mortgage
                  Corporation
         10.2     Operating  Agreement  dated  April 1,  1998  between  HomeSide
                  Lending, Inc.  and  Banc One Corporation and Banc One Mortgage
                  Corporation
         10.3     Unsecured  Revolving  Credit  Agreement  dated  June 23,  1998
                  between HomeSide Lending, Inc. and National Australia Bank
         27       Financial Data Schedule


 (b)   Reports on form 8-K

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



                                   SIGNATURES

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

                           HomeSide International, Inc.
                           (Registrant)

Date: August 14, 1998      By:\s\Joe K. Pickett
                              -----------------
                              Joe K. Pickett
                           Chairman of the Board, Chief Executive Officer
                                    and Director (Principal Executive Officer)

Date: August 14, 1998      By:\s\Kevin D. Race
                              ----------------
                              Kevin D. Race
                           Vice President, Chief Financial Officer and Treasurer
                                    (Principal Financial and Accounting Officer)