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 August 31, 1997

                         OR

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

                   ------------------------               

                 Commission File No. 1-12655

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

   
                          Delaware                                           
(State or other jurisdiction of incorporation or organization)

    
                         59-3387041

               (I.R.S. Employer Identification No.)

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

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



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



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

                                                          Outstanding at
           Class                                        September 24, 1997
           -----                                        ------------------ 
Common stock $0.01 par value                               43,375,430
Class C non-voting common stock $1.00 par value                97,138




                                       1
<PAGE>
                              FINANCIAL INFORMATION

ITEM 1.  Financial Statements

<TABLE>

                                 HOMESIDE, INC.
                           CONSOLIDATED BALANCE SHEET

                    (Dollars in Thousands, Except Share Data)

<CAPTION>

                                                                                  (Unaudited)
                                                                                August 31, 1997     February 28, 1997
                                                                                ---------------     -----------------
<S>                                                                             <C>                 <C>
ASSETS

  Cash and cash equivalents                                                     $         31        $     52,691
  Mortgage loans held for sale, net                                                1,029,620             805,274
  Mortgage servicing rights, net                                                   1,822,433           1,614,307
  Accounts receivable, net                                                           184,590             157,518
  Early pool buyout advances                                                         368,406                 --
  Premises and equipment, net                                                         32,109              29,515
  Other assets                                                                       127,670              92,877
                                                                                ---------------     -----------------
  Total Assets                                                                     3,564,859           2,752,182
                                                                                ===============     =================

  LIABILITIES AND STOCKHOLDERS' EQUITY

  Notes payable                                                                 $  1,868,329        $  1,818,503  
  Accounts payable and accrued liabilities                                           137,466             140,304  
  Deferred income taxes                                                              152,652             129,951  
  Long-term debt                                                                     855,825             151,128  
                                                                                ---------------     -----------------
  Total Liabilities                                                                3,014,272           2,239,886
                                                                                ---------------     -----------------
  Common stock:
       Common stock, $.01 par value, 119,610,000 shares authorized and
           43,375,430 shares issued and outstanding                                      434                 434   
       Class C non-voting common stock, $1.00 par value, 195,000 shares
           authorized, and 97,138 shares issued and outstanding                           97                  97   
  Additional paid-in capital                                                         476,646             476,646  
  Retained earnings                                                                   75,240              36,969  
                                                                                ---------------     -----------------
                                                                                     552,417             514,146   
  Less: Notes received in payment for capital stock                                   (1,830)             (1,850)   
                                                                                ---------------     -----------------
  
  Total Stockholders' Equity                                                         550,587             512,296   
                                                                                ---------------     -----------------
  
  Total Liabilities and Stockholders' Equity                                    $  3,564,859        $  2,752,182   
                                                                                ===============     =================
</TABLE>




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


                                       2
<PAGE>
<TABLE>

                                 HOMESIDE, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)

                    (Dollars in Thousands, Except Share Data)



<CAPTION>

                                                   For the Three        For the Three           For the Six     For the Period from
                                                   Months Ended         Months Ended         Months Ended        March 16, 1996 to
                                                   August 31, 1997      August 31, 1996      August 31, 1997      August 31, 1996
                                                  ---------------      ---------------      ---------------     -----------------  
<S>                                               <C>                  <C>                  <C>                 <C>
REVENUES:

Mortgage servicing fees                            $      103,645       $       83,349       $      203,469      $       124,834  
Amortization of mortgage servicing rights                 (54,535)             (40,464)            (102,741)             (56,906)
                                                   ----------------     ----------------     ----------------    -----------------
    Net servicing revenue                                  49,110               42,885              100,728               67,928

Interest income                                            26,642               22,270               45,884               34,989
Interest expense                                          (23,850)             (23,920)             (45,954)             (38,882)
                                                   ----------------     ----------------     ----------------    -----------------
    Net interest revenue                                    2,792               (1,650)                 (70)              (3,893)
Net mortgage origination revenue                           20,584               16,273               38,510               27,083
Other income                                                  260                  355                1,036                  462
                                                   ----------------     ----------------     ----------------    -----------------
    Total Revenues                                         72,746               57,863              140,204               91,580

EXPENSES:

Salaries and employee benefits                             19,546               21,177               39,282               32,657
Occupancy and equipment                                     3,821                3,084                7,627                4,930
Servicing losses on investor-owned loans
   and foreclosure-related expenses                         5,757                4,058               10,509                7,996
Other expenses                                             10,609               12,523               20,046               17,868
                                                   ----------------     ----------------     ----------------    -----------------
    Total Expenses                                         39,733               40,842               77,464               63,451

Income before income taxes                                 33,013               17,021               62,740               28,129
Income tax expense                                         12,875                6,954               24,469               11,508
                                                   ----------------     ----------------     ----------------    -----------------

Net Income                                         $       20,138       $       10,067       $       38,271      $        16,621
                                                   ================     ================     ================    =================


Net income per share                               $         0.46       $         0.29       $         0.87      $          0.61
                                                   ================     ================     ================    =================

</TABLE>



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



                                       3
<PAGE>
<TABLE>
                                 HOMESIDE, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (UNAUDITED)

                             (Dollars in Thousands)

<CAPTION>
                                                                                                                    For the Period 
                                                                 For the Three    For the Three    For the Six      from March 16,
                                                                 Months Ended     Months Ended     Months Ended         1996 to    
                                                                 August 31, 1997  August 31, 1996  August 31, 1997  August 31, 1997 
                                                                 ---------------  ---------------  ---------------  ---------------
      <S>                                                        <C>              <C>              <C>              <C>
      CASH FLOWS USED IN OPERATING ACTIVITIES:

      Net income                                                      $20,138          $10,067          $38,271          $16,621
      Adjustments to reconcile net income to net cash used in
            operating activities:
        Amortization of mortgage servicing rights                      54,535           40,464          102,741           56,906
        Depreciation and amortization                                   2,794            3,158            5,402            4,389
        Servicing losses on investor-owned loans expenses               3,382            4,058            6,565            7,996
        Deferred income tax expense                                    12,875            6,954           24,469           11,508
        Capitalized excess servicing rights                              --             (6,526)             --            (9,240) 
        Mortgage loans originated and purchased for sale           (7,150,009)      (3,238,600)     (12,522,481)       5,554,807)
        Proceeds and principal repayments of mortgage loans held    
          for sale                                                  6,926,778        2,909,492       12,298,135        5,136,890
        Change in accounts receivable                                  12,598          (17,638)         (33,637)         (19,106)
        Change in other assets and accounts payable and accrued        
          liabilities                                                  (1,862)          77,402           (7,677)           9,692
                                                                 ---------------  ---------------  ---------------  ---------------
      Net cash used in operating activities                         (118,771)         (211,169)         (88,212)        (339,151)

      CASH FLOWS USED IN INVESTING ACTIVITIES:

      Purchase of premises and equipment, net                         (1,452)             (920)          (5,215)          (2,758)
      Acquisition of mortgage servicing rights                      (138,246)          166,615)        (258,306)        (247,649)
      Net purchases of risk management contracts                     (51,268)          (37,902)         (80,913)         (78,889)
      Early pool buyout advances                                    (368,406)              --          (368,406)             --
      Acquisition of BancBoston Mortgage Corp., net of cash                                                             
        acquired                                                         --                --               --          (133,392) 
      Acquisition of Barnett Mortgage Co., net of cash acquired          --                --               --          (106,244)
                                                                 ---------------  ---------------  ---------------  ---------------
      Net cash used in investing activities                         (559,372)         (205,437)        (712,840)        (568,932)

      CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:

      Net borrowings from banks                                      210,995           186,753           49,826          603,899
      Issuance of notes payable                                      455,000               --           705,000          200,000
      Payment of debt issue costs                                     (4,444)             (522)          (6,131)         (20,321)
      Repayment of long term debt                                       (152)             (148)            (303)            (269)
      Proceeds from issuance of common stock                             --                100              --           152,765
      Issuance of bridge financing                                       --                --               --            90,000
                                                                                                          
      Repayment of bridge financing                                      --                --               --           (90,000)
                                                                                                            
                                                                 ---------------  ---------------  ---------------  ---------------
      Net cash provided by financing activities                      661,399           186,183          748,392          936,074

      Net (decrease) increase in cash and cash equivalents           (16,744)         (230,423)         (52,660)          27,991
      Cash and cash equivalents at beginning of period                16,775           258,414           52,691              --
                                                                 ---------------  ---------------  ---------------  ---------------
      Cash and cash equivalents at end of period                         $31           $27,991              $31          $27,991
                                                                 ===============  ===============  ===============  ===============
</TABLE>

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



                                       4
<PAGE>
                                 HOMESIDE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.  BASIS OF PRESENTATION

     The accompanying  consolidated  financial  statements have been prepared in
accordance with generally accepted  accounting  principles for interim financial
information and with the  instructions to Form 10-Q and Rule 10-01 of Regulation
S-X.  Accordingly,  they do not include  all of the  information  and  footnotes
required by generally  accepted  accounting  principles  for complete  financial
statements. In the opinion of management,  all adjustments (consisting of normal
recurring  adjustments)  considered  necessary for a fair presentation have been
included.  Operating  results for the three and six months ended August 31, 1997
are not  necessarily  indicative  of the results  that may be  expected  for the
fiscal year ending  February 28,  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 28, 1997 of HomeSide, Inc. ("HomeSide" or the "Company").

      HomeSide,  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 ("Bank of Boston"), and Barnett Banks, Inc. ("Barnett").

2.  MORTGAGE SERVICING RIGHTS

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


Balance, February 28, 1997                             $1,614,307
Additions                                                 258,306
Deferred hedge loss                                        52,561
Amortization                                            (102,741)
                                                   ---------------

Balance, August 31, 1997                               $1,822,433
                                                   ===============

3.  NOTES PAYABLE

    HomeSide  borrows funds on a demand basis from an  independent  syndicate of
banks under a $2.5 billion  credit  facility.  Under certain  circumstances  set
forth  in  the  credit   agreement,   borrowings   under  the  agreement  become
collateralized by substantially all of HomeSide's  assets. The line of credit is
used to provide  funds for  HomeSide's  business of  originating,  acquiring and
servicing  mortgage loans.  The line of credit includes both a warehouse  credit
facility,  which is limited to 98% of the fair value of eligible  mortgage loans
held for  sale,  and a  servicing-related  facility,  which is  capped at $950.0
million.  At August 31, 1997, $1.9 billion is outstanding under the credit line.
On February 14, 2000, the line of credit will  terminate.  The credit  agreement
contains  covenants  that  impose  limitations  and  restrictions  on  HomeSide,
including the maintenance of certain net worth and ratio requirements.  HomeSide
is in compliance with all requirements included in the credit agreement. Amounts
outstanding  at August 31, 1997 under the bank line of credit are comprised of a
warehouse  credit  facility  of  $1.0  billion  and a  servicing-related  credit
facility of $0.9 billion.  The amount of the unused bank line of credit was $0.6
billion as of August 31, 1997.

    Borrowings  under the bank line of credit bear  interest at rates per annum,
based on, at  HomeSide'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) a eurodollar rate. At August 31, 1997, the weighted average interest rate
on the  amounts  borrowed  under the bank  credit  facility  was 5.98%,  and the
weighted average interest rate during the three months ended August 31, 1997 was
6.06%.

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

                                       5
<PAGE>
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,  Inc.  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 August 31, 1997 is $ 130.0 million.

     As of August 31,  1997,  outstanding  medium-term  notes issued by HomeSide
Lending,  Inc., under a shelf  registration  statement filed with the Securities
and Exchange Commission (SEC) were as follows (in thousands):

Issue Date         Outstanding Balance     Interest Rate      Maturity Date

May 20, 1997        $250,000                6.890%            May 15, 2000
June 30, 1997       $200,000                6.883%            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                6.818%            August 1, 2004
                    ---------

     Total          $705,000
                    =========

     As of August 31, 1997, $650.0 million of the outstanding  medium-term notes
had been effectively converted by interest rate swap agreements to floating-rate
notes. The weighted  average  borrowing rates on medium-term note borrowings for
the three and six month periods  ended August 31, 1997,  including the effect of
the interest rate swap agreements,  were 6.184%, and 5.983%,  respectively.  Net
proceeds  from  the  issuances   were  primarily  used  to  reduce  the  amounts
outstanding  under the bank  credit  agreement.  As of August 31,  1997,  $295.0
million  was  available  for  future  issuances  under  the  Shelf  Registration
Statement.

5.  EARLY POOL BUYOUT ADVANCES

     HomeSide  initiated  an early pool buyout  program  during the three months
ended August 31, 1997,  which  involves  the purchase of  delinquent  government
loans  from  pools  early  in the  foreclosure  process,  thereby  reducing  the
unreimbursed interest expense that HomeSide incurs.  Scheduled interest payments
made to the  investor  for  delinquent  loans are  recorded as early pool buyout
advances with a reserve for advances which will not ultimately be collected. The
funding of the  purchases  of these  delinquent  loans for the early pool buyout
program is recorded as interest  expense,  and interest  income  earned from the
guarantor agency during the foreclosure  process is accrued to match the funding
expense incurred.

6.  COMMITMENTS AND CONTINGENCIES

    HomeSide  announced in August an agreement with a wholly owned subsidiary of
Barnett,  whereby Barnett intends to transfer its broker origination  operations
outside of Florida and Georgia,  which operate  under the name Loan America,  to
HomeSide in exchange for the  exclusive  right to refinance  mortgages  and sell
mortgage-related  products  to its Florida  and  Georgia  customers  serviced by
HomeSide. If this agreement is consummated,  management believes that the impact
on HomeSide will be immaterial.

     On August  29,  1997,  NationsBank  Corporation  and  Barnett  Banks,  Inc.
announced a definitive  agreement for  NationsBank  to merge the two  companies.
HomeSide's  management has not determined what impact,  if any, this merger will
have on HomeSide.

7.  SUBSEQUENT EVENTS

     On September  15, 1997,  an  additional  $45.0 million of 6.77% medium term
notes maturing on September 17, 2001 were issued by HomeSide Lending, Inc. under
the Shelf Registration Statement. Interest is payable semiannually in arrears on
June 30 and  December 30 of each year,  commencing  on December  30,  1997.  Net
proceeds were used for working capital and general corporate purposes.

                                       6
<PAGE>
ITEM 2.  Management's Discussion and Analysis of Financial  Condition and 
         Results of Operations

General

      HomeSide,  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  ("Bank  of  Boston"),  and  Barnett  Banks,  Inc.  ("Barnett").
HomeSide's strategy  emphasizes variable cost mortgage  origination and low cost
servicing.  Headquartered  in Jacksonville,  Florida,  HomeSide ranks as the 5th
largest  originator  and the 7th  largest  servicer  in the  United  States  for
calendar 1996 based on data published by National Mortgage News.

       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 Bank of Boston and Barnett arrangements.

  Forward-Looking Statements

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

   Loan Production Activities

      As a  multi-channel  loan  production  lender,  HomeSide  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  eliminates  the fixed costs  associated  with  traditional
mortgage  branch  offices.  Without  the burden of high  fixed cost  origination
overhead,  HomeSide is well  positioned  to weather a variety of  interest  rate
environments.

      The  following   information  regarding  loan  production  activities  for
HomeSide is  presented to aid in  understanding  the results of  operations  and
financial  condition of HomeSide for the three months ended August 31, 1997, the
three months ended August 31, 1996, and for the six months ended August 31, 1997
and the period from March 16, 1996 to August 31, 1996 (in millions):

<TABLE>
<CAPTION>
                                  For the Three      For the Three      For the Six      For the Period from
                                   Months Ended       Months Ended       Months Ended      March 16, 1996 to
                                  August 31, 1997    August 31, 1996    August 31, 1997     August 31, 1996
                                  ---------------    ---------------    ---------------     ---------------                 
<S>                               <C>                <C>                <C>                 <C>      
Correspondent                         $3,802              $2,950             $7,024             $4,843
Co-issue                               1,486               2,208              2,677              3,627
Broker                                   307                 155                696                375
                                     --------           ---------          ---------          ---------
Total wholesale                        5,595               5,313             10,397              8,845
Direct                                    75                 179                144                427
                                     --------           ---------          ---------          ---------
Total production                       5,670               5,492             10,541              9,272
Bulk acquisitions                      1,480               4,073              1,981              4,073
                                     ========           =========          =========          =========
Total production and acquisitions     $7,150              $9,565            $12,522            $13,345
                                     ========           =========          =========          =========
</TABLE>
                                       7
<PAGE>
      Total loan production,  excluding bulk acquisitions,  was $5.7 billion for
the three months  ended  August 31, 1997  compared to $5.5 billion for the three
months ended August 31, 1996.  Loan  production  for the six months ended August
31, 1997,  excluding bulk acquisitions,  increased $1.2 billion to $10.5 billion
from $9.3  billion for the period from March 16,  1996 to August 31,  1996.  The
increases  were  primarily  due to growth in  HomeSide's  correspondent  lending
channel,  which  increased 29% to $3.8 billion for the three months ended August
31, 1997 from $3.0  billion for the three  months  ended  August 31,  1996,  and
increased 45% to $7.0 billion for the six months ended August 31, 1997 from $4.8
billion for the period from March 16, 1996 to August 31, 1996. In addition,  the
May 31, 1996 acquisition of Barnett Mortgage Company,  a wholly owned subsidiary
of Barnett  ("BMC") and the preferred  partnership  agreement with Barnett under
which all loans  originated by Barnett are sold to HomeSide  contributed  to the
growth in production  for the six month period ended August 31, 1997 compared to
the period  from  March 16,  1996 to August 31,  1996.  HomeSide  also made bulk
servicing  acquisitions of $1.5 billion during the three months ended August 31,
1997 and $4.1 billion during the three months ended August 31, 1996.

      HomeSide  continues  to  examine  a number of ways to  diversify  and grow
revenue  sources from its existing  and new customer  base.  HomeSide is nearing
completion  of an  alliance  with a  sub-prime  mortgage  lender to create a B&C
mortgage product line for HomeSide's production network.

   Servicing Portfolio

      Management  believes that HomeSide is one of the most  efficient  mortgage
servicers in the industry based on its servicing cost per loan and the number of
loans  serviced per employee.  The servicing  operation  makes  extensive use of
state-of-the-art technology, process re-engineering and expense management. With
a portfolio  size of over $96 billion,  HomeSide  services the loans of over one
million  homeowners from across the United States and is committed to protecting
the value of this important asset by a sophisticated  risk management  strategy.
HomeSide  anticipates  its low cost of servicing loans will continue to maximize
the bottom-line impact of its growing servicing  portfolio.  HomeSide's focus on
efficient  and low cost  processes  is  pursued  through  the  selective  use of
automation as well as the strategic  outsourcing of selected servicing functions
and effective control of delinquencies  and  foreclosures.  Following a national
and seasonal trend,  delinquencies and foreclosure expenses increased during the
three months ended August 31, 1997; however, the direct servicing  cost-per-loan
continued to decline during this period.

      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  August 31, 1997,  the three
months ended  August 31, 1996,  and for the six months ended August 31, 1997 and
the period from March 16, 1996 to August 31, 1996 (in millions):

<TABLE>
<CAPTION>
                                          For the Three        For the Three        For the Six     For the Period from
                                          Months Ended         Months Ended        Months Ended      March 16, 1996 to
                                         August 31, 1997      August 31, 1996     August 31, 1997     August 31, 1996
                                         ---------------      ---------------     ---------------     ---------------            
<S>                                      <C>                  <C>                 <C>                 <C>
Balance at beginning of period               $92,637               $78,391              $90,192             $42,907
Acquisition of BMC                                --                    --                   --              33,082
Other additions                                7,150                 9,842               12,522              13,944
                                         ------------          ------------         ------------        ------------
     Total additions                           7,150                 9,842               12,522              47,026
                                         ------------          ------------         ------------        ------------
Scheduled amortization                           534                   494                1,065                 729
Prepayments                                    2,550                 1,702                4,694               3,023
Foreclosures                                     141                   137                  312                 267
Sales of servicing                                 8                    65                   89                  79
                                         ------------          ------------         ------------        ------------
     Total reductions                          3,233                 2,398                6,160               4,098
                                         ============          ============         ============        ============
Balance at end of period                     $96,554               $85,835              $96,554             $85,835
                                         ============          ============         ============        ============
</TABLE>

      The number of loans serviced at August 31, 1997 was 1,156,914, compared to
1,059,000  at August 31,  1996.  HomeSide's  strategy  is to build its  mortgage
servicing   portfolio  by   concentrating  on  variable  cost  loan  origination
strategies,  and as a result, benefit from improved economies of scale. A key to
HomeSide's future growth is the proprietary  servicing  software  purchased from
Barnett.  This  system  will  allow  HomeSide  to double its  current  servicing
capacity  on a single  system.  During  the next  quarter,  HomeSide  expects to
transfer  approximately  one-third  of the  loans to its  proprietary  servicing
software.  Once the initial  transfer is  complete,  over half of the  servicing
portfolio will be serviced on the proprietary system.

                                       8
<PAGE>
Results of Operations

Three  months  ended  August 31, 1997  compared to three months ended August 31,
1996

   Summary

      HomeSide's net income  increased  approximately  100% to $20.1 million for
the three months  ended August 31, 1997 from $10.1  million for the three months
ended August 31, 1996. Total revenues for the three months ended August 31, 1997
increased  26% to $72.7  million  from $57.9  million for the three months ended
August 31, 1996.  The  increases in net income and revenues for the three months
ended  August 31, 1997  compared to the three  months ended August 31, 1996 were
primarily  attributable  to increases of $6.2 million in net servicing  revenue,
$4.3  million  in net  mortgage  origination  revenue,  and $4.5  million in net
interest revenue,  while total expenses decreased by $1.1 million.  The increase
in net servicing  revenue was mainly a result of a $10.8 billion increase in the
servicing  portfolio to $96.6  billion at August 31, 1997 from $85.8  billion at
August  31,  1996.  Net  mortgage  origination  revenue  increased  due to  loan
production volume increases while mortgage origination expenses decreased mainly
as a result of the integration of BMC mortgage servicing  operations acquired on
May 31, 1996. Net interest  revenue  increased  primarily as a result of reduced
borrowing  costs from the bank line of credit from improved  credit  ratings and
the issuance of medium-term notes which expanded borrowing capacity.

    Net Servicing Revenue

      Net servicing  revenue was $49.1 million for the three months ended August
31, 1997  compared to $42.9  million for the three months ended August 31, 1996.
Net  servicing  revenue is  comprised  of  mortgage  servicing  fees,  ancillary
servicing revenue, and amortization of mortgage servicing rights.

      Mortgage  servicing  fees  increased  24% to $103.6  million for the three
months  ended  August 31,  1997 from $83.3  million for the three  months  ended
August 31,  1996,  primarily  as a result of growth of the  servicing  portfolio
through loan production channels and bulk servicing acquisitions.  The servicing
portfolio  increased  to $96.6  billion at August  31,  1997  compared  to $85.8
billion at August 31, 1996, a 13% increase. HomeSide's weighted average interest
rate of the mortgage  loans in the  servicing  portfolio was 7.89% at August 31,
1997 and 7.92% at August 31, 1996. The weighted average servicing fee, including
ancillary  income,  for the  servicing  portfolio  was 0.436% and 0.405% for the
three  months  ended August 31, 1997 and the three months ended August 31, 1996,
respectively.  The increase in the weighted average servicing fee from the three
months  ended  August 31, 1997 to the three months ended August 31, 1996 was due
to growth of ancillary revenues  including late fees and other  mortgage-related
products and higher  proportions of government  loans  serviced which  typically
have a higher  servicing  fee.  During the three  months  ended August 31, 1997,
HomeSide  entered  into an  agreement  with First USA Bank,  one of the nation's
leading  credit card issuers,  which permits first USA to market a HomeSide Visa
card to  HomeSide  customers  for a  non-refundable  fee.  Amortization  expense
increased to $54.5 million for the three months ended August 31, 1997 from $40.5
million  for the three  months  ended  August 31,  1996  mainly as a result of a
higher average balance of mortgage  servicing  rights and a decrease of 56 basis
points in average mortgage interest rates from the three months ended August 31,
1996 to the three months ended August 31, 1997.

   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.

                                       9
<PAGE>
      Net interest revenue  increased $4.5 million to $2.8 million for the three
months  ended  August 31, 1997 from $(1.7)  million for the three  months  ended
August 31,  1996,  primarily  due to improved  funding  rates  obtained  through
improved credit ratings,  the issue of medium-term  notes and the adoption of an
early pool  buyout  program.  During the three  months  ended  August 31,  1997,
HomeSide's  primary operating  subsidiary,  HomeSide  Lending,  Inc. issued $455
million of  medium-term  notes to the public market at an average cost of 5.932%
as of August 31, 1997.  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 $20.6  million for the three months
ended  August 31, 1997  compared to $16.3  million  for the three  months  ended
August 31,  1996,  a 26%  increase.  The  increase in net  mortgage  origination
revenue  during the three  months ended August 31, 1997 as compared to the three
months ended August 31, 1996  reflects an increase in loan  production  volumes,
primarily through HomeSide's  correspondent  lending channel, and an increase in
gains from secondary marketing activities.

   Salaries and Employee Benefits

      Salaries and  employee  benefits  expense was $19.5  million for the three
months  ended  August 31, 1997  compared to $21.2  million for the three  months
ended  August  31,  1996  due  to the  continuing  integration  of BMC  mortgage
servicing  operations  acquired on May 31, 1996. The average number of full-time
equivalent  employees  decreased  to 1,734 for the three months ended August 31,
1997 from 1,879 for the three months ended August 31, 1996.

   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  August 31, 1997 was $3.8 million  compared to $3.1 million for the
three months  ended  August 31, 1996.  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.

      During the three months ended August 31,  1997,  the  servicing  losses on
investor-owned  loans and  foreclosure-related  expenses  totaled  $5.8  million
compared  to $4.1  million  for the three  months  ended  August 31,  1996.  The
increase  was  largely  attributable  to the growth of the  servicing  portfolio
resulting  from loan  production  and increased  foreclosure  losses,  which are
likely to continue at this level as the servicing portfolio ages.

      Included  in the balance of accounts  payable and accrued  liabilities  at
August 31, 1997 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.

                                       10
<PAGE>
The  following   table  sets  forth   HomeSide's   delinquency  and  foreclosure
experience:

                        Servicing Portfolio Delinquencies
                             (percent by loan count)
                                                                     
                                         For the Three     For the Period From
                                         Months Ended       March 31, 1996 to 
                                        August 31, 1997      August 31, 1996
                                        ---------------      ---------------
Servicing Portfolio Delinquencies,  
  excluding bankruptcies
  (at end of period)
          30 days                            3.45%                3.08%
          60 days                            0.73%                0.64%
          90+ days                           0.55%                0.48%
                                        ===============      ===============
               Total past due                4.73%                4.20%
                                        ===============      ===============
          Foreclosures pending               0.70%                0.66%
                                        ===============      ===============


   Other Expenses

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

      Other  expenses  during the three  months ended August 31, 1997 were $10.6
million  compared to $12.5  million for the three  months ended August 31, 1996,
primarily  due to the  continuing  integration  of the  BMC  mortgage  servicing
operations acquired on May 31, 1996.

   Income Tax Expense

      HomeSide's income tax expense was $12.9 million for the three months ended
August 31, 1997 and $7.0 million for the three months ended August 31, 1996. The
effective  income tax rates for the three  months  ended August 31, 1997 and the
three months ended August 31, 1996 were approximately 39% and 41%, respectively.

Results of Operations

Six months  ended  August 31,  1997  compared  to period  from March 16, 1996 to
August 31, 1996

   Summary

      HomeSide's  net income  increased 130% to $38.3 million for the six months
ended  August 31, 1997 from $16.6  million for the period from March 16, 1996 to
August 31,  1996.  Total  revenues  for the six  months  ended  August 31,  1997
increased 53% to $140.2 million from $91.6 million for the period from March 16,
1996 to August 31,  1996.  The  increases in net income and revenues for the six
months  ended  August 31,  1997  compared  to the period  from March 16, 1996 to
August 31, 1996 were primarily attributable to the acquisition of BMC on May 31,
1996 and increases of $32.8 million in net servicing  revenue,  $11.4 million in
net mortgage  origination revenue, and $3.8 million in net interest revenue. The
BMC servicing  portfolio  was $33.1 billion at May 31, 1996 and its  acquisition
increased  HomeSide's servicing portfolio by 75% on that date, which was a major
factor  in the  increase  in net  servicing  revenue.  In  addition,  subsequent
increases in the size of the servicing  portfolio  contributed  to the increased
revenue.  The servicing  portfolio increased to $96.6 billion at August 31, 1997
from $85.8  billion  at August  31,  1996,  a 13%  increase.  As part of the BMC
acquisition,  Barnett  agreed to sell  HomeSide  the loans  produced by the loan
production  networks  retained by Barnett,  which contributed to the increase in
net mortgage  origination revenue. Net interest revenue increased primarily as a
result of reduced  borrowing  costs from the bank line of credit  from  improved
credit  ratings and the issuance of medium-term  notes which expanded  borrowing
capacity.

    Net Servicing Revenue

      Net servicing  revenue was $100.7  million for the six months ended August
31, 1997  compared to $67.9 million for the period from March 16, 1996 to August
31,  1996.  Net  servicing  revenue is  comprised  of mortgage  servicing  fees,
ancillary  servicing  revenue,  and  amortization of mortgage  servicing  rights
expense.

                                       11
<PAGE>
      Mortgage servicing fees increased 63% to $203.5 million for the six months
ended August 31, 1997 from $124.8  million for the period from March 16, 1996 to
August 31, 1996,  primarily as a result of the BMC acquisition and growth of the
servicing   portfolio  through  loan  production  channels  and  bulk  servicing
acquisitions.  The servicing  portfolio increased to $96.6 billion at August 31,
1997 compared to $85.8 billion at August 31, 1996.  HomeSide's  weighted average
interest  rate of the mortgage  loans in the  servicing  portfolio  was 7.89% at
August 31, 1997 and 7.92% at August 31,  1996.  The weighted  average  servicing
fee,  including  ancillary  income,  for the servicing  portfolio was 0.436% and
0.429% for the six months  ended  August 31,  1997 and the period from March 16,
1996 to August 31, 1996,  respectively.  The  increase in the  weighted  average
servicing  fee for the six months  ended  August 31,  1997 from the period  from
March 16,  1996 to August  31,  1996 was due to  growth  of  ancillary  revenues
including  late fees and  revenues  from other  mortgage-related  products,  and
higher  proportions of government  loans serviced which  typically have a higher
servicing  fee.  Amortization  expense  increased to $102.7  million for the six
months  ended  August 31, 1997 from $56.9  million for the period from March 16,
1996 to  August  31,  1996  mainly as a result of a higher  average  balance  of
mortgage  servicing rights and a decrease of 26 basis points in average mortgage
interest rates from the period from March 16, 1996 to August 31, 1996 to the six
months ended August 31, 1997.

 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  increased  $3.8  million for the six months  ended
August 31, 1997 to $(0.1) from $(3.9) million for the period from March 16, 1996
to August 31, 1996,  primarily due to improved  funding rates  obtained  through
improved credit ratings,  the issue of medium-term  notes and the adoption of an
early  pool  buyout  program.  During  the six months  ended  August  31,  1997,
HomeSide's  primary operating  subsidiary,  HomeSide  Lending,  Inc. issued $705
million of  medium-term  notes to the public market at an average cost of 5.953%
as of August 31, 1997.  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 $38.5  million for the six months
ended  August 31, 1997  compared to $27.1  million for the period from March 16,
1996  to  August  31,  1996,  a 42%  increase.  The  increase  in  net  mortgage
origination  revenue  during the six months ended August 31, 1997 as compared to
the period from March 16,  1996 to August 31,  1996 is due in part to  increased
production  resulting  from  the  preferred  seller  relationship  with  Barnett
established  as part of the BMC  acquisition.  Barnett  agreed to sell  HomeSide
loans produced by the loan production networks retained by Barnett. The increase
also  reflects  an  increase  in  loan  production   volumes  primarily  through
HomeSide's correspondent lending channel and an increase in gains from secondary
marketing activities.

   Salaries and Employee Benefits

      Salaries  and  employee  benefits  expense  was $39.3  million for the six
months ended August 31, 1997 compared to $32.7 million for the period from March
16, 1996 to August 31, 1996 due to the  purchase of the BMC  mortgage  servicing
operations acquired on May 31, 1996. The average number of full-time  equivalent
employees decreased to 1,734 for the six months ended August 31, 1997 from 1,879
for the period from March 16, 1996 to August 31, 1996.

                                       12
<PAGE>
   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 six
months ended  August 31, 1997 was $7.6 million  compared to $4.9 million for the
period  from March 16,  1996 to August 31,  1996.  The  increase  in expense was
mainly due to the premises and equipment  acquired in the BMC acquisition and an
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 final  disposition of loans,  non-recoverable
foreclosure  costs,  accrued  interest  for which  payment  has been  denied and
estimates for potential  losses based on HomeSide's  experience as a servicer of
government loans.

      During the six months  ended  August 31,  1997,  the  servicing  losses on
investor-owned  loans and  foreclosure-related  expenses  totaled  $10.5 million
compared to $8.0  million for the period from March 16, 1996 to August 31, 1996.
The increase was largely  attributable to the growth of the servicing  portfolio
resulting  from loan  production  and increased  foreclosure  losses,  which are
likely to continue at this level as the servicing portfolio ages.

      Included  in the balance of accounts  payable and accrued  liabilities  at
August 31, 1997 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)

                                        For the Six       For the Period from
                                       Months Ended        March 16, 1996 to
                                      August 31, 1997       August 31, 1996
                                      ---------------       ---------------   
Servicing Portfolio Delinquencies, 
  excluding bankruptcies
  (at end of period)
          30 days                          3.45%                 3.08%
          60 days                          0.73%                 0.64%
          90+ days                         0.55%                 0.48%
                                      ---------------       ---------------
               Total past due              4.73%                 4.20%
                                      ===============       ===============
          Foreclosures pending             0.70%                 0.66%
                                      ===============       ===============

   Other Expenses

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

      Other  expenses  during the six months  ended  August 31,  1997 were $20.0
million  compared to $17.9  million for the period from March 16, 1996 to August
31,  1996,  primarily  due to the  acquisition  of the  BMC  mortgage  servicing
operations on May 31, 1996.

                                       13
<PAGE>
   Income Tax Expense

      HomeSide's  income tax expense was $24.5  million for the six months ended
August 31,  1997 and $11.5  million for the period from March 16, 1996 to August
31, 1996.  The  increases  were  attributable  to  increases in net income.  The
effective  income tax rates for the six  months  ended  August 31,  1997 and the
period from March 16, 1996 to August 31,  1996 were  approximately  39% and 41%,
respectively.

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 loans and therefore, the value of the servicing
portfolio declines as prepayments increase.

      Since its formation,  HomeSide has purchased options on 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  option  contracts  used by
HomeSide  have  characteristics  such  that they  tend to  increase  in value as
interest rates decline.  Conversely,  these option  contracts tend to decline in
value as interest rates rise. Accordingly,  changes in value of these securities
will  tend to move  inversely  with  changes  in  value of  HomeSide's  mortgage
servicing rights.

      These option  contracts 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 option contracts are
marked-to-market  with changes in market value  deferred as an adjustment to the
carrying  value of the related  mortgage  servicing  right  asset being  hedged.
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  options  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.  During  each  of the  periods  presented,  HomeSide  has
experienced  a high  measure  of  correlation  between  changes  in the value of
mortgage  servicing  rights and the  option  contracts.  However,  in periods of
rising interest rates,  the increase in value of mortgage  servicing  rights may
outpace  the  decline in value of the option  contracts  because the loss on the
options is limited to the premium paid.

      The  option-based  hedge  strategy  designed  to protect  the value of the
servicing  asset  continued to perform as expected during the three months ended
August 31, 1997 and proved especially effective as long-term rates reached their
lowest level since November of 1996. For the three months ended August 31, 1997,
the value of the hedge was largely unchanged as HomeSide incurred losses on risk
management  contracts of $0.2 million.  During the three months ended August 31,
1996,  the loss on risk  management  contracts  was $42.1  million.  For the six
months  ended  August 31,  1997 and the period from March 16, 1996 to August 31,
1996, HomeSide incurred losses of $52.6 million and $74.7 million, respectively.
The  increase  in the  estimated  fair value of the  mortgage  servicing  rights
approximated  the net losses on risk  management  contracts  for these  periods.
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 August 31, 1997 was $73.6  million,  which was equal to
their carrying amount because the options 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 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.  In the past, the Company has
also utilized short-term credit facilities and public offerings of common stock.
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 issue mortgage  backed
securities.

   Operations

      Net cash used in  operations  was $88.2  million for the six months  ended
August 31, 1997.  Proceeds from the issuance of  medium-term  notes were used to
fund loan  originations.  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.  Higher cash demands to meet increased loan production
levels are primarily met through borrowings and loan sales.

                                       14
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    Investing

      Net cash used in  investing  activities  was  $712.8  million  for the six
months  ended August 31, 1997.  Cash used in  investing  activities  was for the
purchase and origination of mortgage  servicing rights,  the purchase of options
of U.S.  Treasury bond futures as part of HomeSide's  hedging  program,  and for
funding  the  early  pool  buyout  program.  Future  uses of cash for  investing
activities will be dependent on the mortgage  origination  market and HomeSide's
hedging  needs.  HomeSide is not able to estimate  the timing and amount of cash
uses  for  future  acquisitions  of other  mortgage  banking  entities,  if such
acquisitions were to occur.

   Financing

      Net cash provided by financing  activities  was $748.4 million for the six
months  ended  August  31,  1997.  The  primary  source of cash  from  financing
activities during the period was $705.0 million from the issuance of medium-term
notes and net borrowings from HomeSide's line of credit.  Cash used in financing
activities was used for the payment of debt issue costs.

      During the six months ended August 31, 1997,  net cash used in  operations
was $88.2 million,  net cash used in investing  activities was 712.8 million and
net cash provided by financing activities was $748.4 million, resulting in a net
decrease  in cash of $52.7  million.  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.




                           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
                  11       Statement Regarding Computation of Earnings per share
                  27       Financial Data Schedule
      (b)   Reports on form 8-K

HomeSide filed no reports on form 8-K during the three months ended 
August 31, 1997.

                                       15
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                                   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, Inc.
                         --------------
                         (Registrant)

Date: October 10, 1997    By:   /s/Joe K. Pickett
                               -----------------
                                Joe K. Pickett
                          Chairman of the Board, Chief Executive Officer
                            and Director (Principal Executive Officer)

Date: October 10, 1997    By:  /s/Kevin D. Race
                              ----------------   
                               Kevin D. Race
                         Vice President, Chief Financial Officer and Treasurer
                                  (Principal Financial and Accounting Officer)