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

                                   FORM 10-Q/A

(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, 2001

                                       OR

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

                           Commission File No. 1-12655

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

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


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

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



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



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

            Class                                Outstanding at December 6, 2001
            -----                                ------------------------------
Common stock $0.01 par value                             1.724 Shares
Class C non-voting common stock $1.00 par value              none




<PAGE>
<TABLE>










                          HOMESIDE INTERNATIONAL, INC.
                                   FORM10-Q/A
                      Quarterly Period Ended June 30, 2001

                                      INDEX


                                                                                                                           Page No.
                                                                                                                           --------
PART I.  FINANCIAL INFORMATION
<S>                                                                                                                            <C>
ITEM 1.      Financial Statements (unaudited)   (Note A):

             Consolidated Balance Sheets as of June 30, 2001 and September 30, 2000........................................    3

             Consolidated Statements of Income and Comprehensive Income for the Three and Nine
                      Months Ended June 30, 2001 and June 30, 2000.........................................................    4

             Consolidated Statements of Cash Flows for the Three and Nine Months Ended
                      June 30, 2001 and June 30, 2000......................................................................    5

             Notes to Consolidated Financial Statements....................................................................    6

ITEM 2.      Management's Discussion and Analysis of Financial Condition and Results of Operations.........................    15


PART II.  OTHER INFORMATION

Item 1.      Legal Proceedings.............................................................................................    26

Item 6.      Exhibits and Reports on Form 8-K..............................................................................    26


SIGNATURES.................................................................................................................    27

</TABLE>


Note A

As  discussed in Note 2 of the  consolidated  financial  statements  of HomeSide
International,  Inc. (the "Company")  included herein,  the Company announced on
September 4, 2001 the discovery of an incorrect  interest rate assumption in the
mortgage  servicing  rights model.  As a result,  the Company has determined the
necessity to restate certain previously  reported interim financial  statements.
The  restatement,  as presented  herein,  corrects the effects of the  incorrect
interest rate assumption on the  consolidated  financial  statements and related
notes for the three and nine months ended June 30, 2001.


                                       2
<PAGE>

<TABLE>

                              FINANCIAL INFORMATION

ITEM 1.  Financial Statements


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


                                                                                            June 30, 2001         September 30, 2000
                                                                                             (Restated)
                                                                                        ----------------------    ------------------
    ASSETS

<S>                                                                                         <C>                     <C>
Cash and cash equivalents .........................................................         $   281,341             $   110,737
Mortgage loans held for sale, net .................................................           1,676,747               1,441,216
Mortgage servicing rights, net ....................................................           4,265,120               4,464,312
Early pool buyout advances ........................................................             159,104                 141,255
Accounts receivable, net ..........................................................             270,536                 324,028
Premises and equipment, net .......................................................              85,084                  80,052
Goodwill, net .....................................................................             585,664                 612,018
Other assets ......................................................................             151,064                  93,415
                                                                                            -----------             -----------

Total Assets ......................................................................         $ 7,474,660             $ 7,267,033
                                                                                            ===========             ===========

LIABILITIES AND STOCKHOLDER'S EQUITY

Accounts payable and accrued liabilities ..........................................         $   501,673             $   587,275
Risk management instruments at fair value, net ....................................             306,091                       -
Notes payable .....................................................................           4,009,000               3,235,400
Long-term debt ....................................................................           1,906,055               1,899,772
Deferred income taxes, net ........................................................               9,095                 271,369
                                                                                            -----------             -----------

Total Liabilities .................................................................           6,731,914               5,993,816
                                                                                            -----------             -----------

Stockholder's Equity:
Common stock:
    Common stock, $0.01 par value, 100 shares authorized and 1 share issued
       outstanding ................................................................                   -                       -
    Class C non-voting common stock, $1.00 par value, 195,000 shares
       authorized, and 0 shares issued and outstanding ............................                   -                       -

Additional paid-in capital ........................................................           1,231,302               1,231,302
(Accumulated deficit) retained earnings ...........................................            (493,872)                 41,915
Accumulated other comprehensive income ............................................               5,316                       -
                                                                                            -----------             -----------

Total Stockholder's Equity ........................................................             742,746               1,273,217
                                                                                            -----------             -----------

Total Liabilities and Stockholder's Equity ........................................         $ 7,474,660             $ 7,267,033
                                                                                            ===========             ===========
</TABLE>


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


                                       3
<PAGE>
<TABLE>

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



                                                                For the Three     For the Three      For the Nine     For the Nine
                                                                Months Ended      Months Ended       Months Ended     Months Ended
                                                                June 30, 2001     June 30, 2000      June 30, 2001    June 30, 2000
                                                                 (Restated)                           (Restated)
                                                                --------------    -------------      -------------    -------------

REVENUES:


<S>                                                                <C>               <C>               <C>             <C>
Mortgage servicing fees                                            $ 224,927         $ 182,542         $ 653,380       $ 539,369
Amortization of mortgage servicing rights                           (171,797)          (97,085)         (427,451)       (297,272)
Valuation provision of mortgage servicing rights                      75,280                 -          (827,090)              -
Risk management of mortgage servicing rights                        (525,280)                -           (17,218)              -
                                                                   ---------         ---------         ---------       ---------
    Net servicing (expense) revenue                                 (396,870)           85,457          (618,379)        242,097

Interest income                                                       32,889            26,329            90,723          92,601
Interest expense                                                     (38,672)          (44,500)         (134,481)       (123,087)
                                                                   ---------         ---------         ---------       ---------
    Net interest expense                                              (5,783)          (18,171)          (43,758)        (30,486)

Net mortgage origination revenue                                      67,723            13,631           129,905          52,540
Other income                                                           4,195             1,505            11,780           3,617
                                                                   ---------         ---------         ---------       ---------
    Total (Expenses) Revenues                                       (330,735)           82,422          (520,452)        267,768


EXPENSES:
Salaries and employee benefits                                        38,094            27,905           100,614          83,594
Occupancy and equipment                                               10,433             7,690            29,640          23,959
Servicing losses on investor-owned loans
   and foreclosure-related expenses                                    8,878             9,092            27,077          24,847
Goodwill amortization                                                  8,785             8,974            26,355          26,922
Other expenses                                                        16,881            13,288            51,915          35,963
                                                                   ---------         ---------         ---------       ---------
    Total Expenses                                                    83,071            66,949           235,601         195,285


(Loss) income before income taxes, extraordinary item and           (413,806)           15,473          (756,053)         72,483
cumulative effect of a change in accounting principle
Income tax (benefit) expense                                        (147,845)            8,923          (266,397)         29,483
                                                                   ---------         ---------         ---------       ---------

(Loss) income before extraordinary item and cumulative
effect of a change in accounting principle                          (265,961)            6,550          (489,656)         43,000

Extraordinary item - gain on early extinguishment of                     987                 -               987               -
debt, net of income tax expense of $567
Cumulative effect of a change in accounting for                            -                 -               883               -
derivative instruments and hedging activities, net of
income tax expense of $507
                                                                   ---------         ---------         ---------       ---------
Net (loss) income                                                   (264,974)            6,550          (487,786)         43,000

Other comprehensive income, net of tax:
      Cumulative effect of a change in accounting                          -                 -            (9,133)              -
      for derivative instruments and hedging activities
      Net gains on current period cash flow                            5,393                 -             4,856               -
      Less: reclassification adjustment for losses                                           -                                 -
      included in net income                                             475                               9,593
                                                                   ---------         ---------         ---------       ---------
Other comprehensive income                                             5,868                 -             5,316               -
                                                                   ---------         ---------         ---------       ---------

Comprehensive (loss) income                                        $(259,106)        $   6,550         $(482,470)      $  43,000
                                                                   =========         =========         =========       =========


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


                                       4
<PAGE>
<TABLE>


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

                             (Dollars in Thousands)


                                                                         For the        For the       For the Nine     For the Nine
                                                                       Three Months   Three Months     Months Ended     Months Ended
                                                                          Ended          Ended       June 30, 2001    June 30, 2000
                                                                       June 30, 2001  June 30, 2000     (Restated)
                                                                        (Restated)
                                                                       -------------  -------------  --------------   --------------
CASH FLOWS  PROVIDED BY (USED IN) OPERATING ACTIVITIES AND
RISK MANAGEMENT RESULTS:

<S>                                                                     <C>            <C>            <C>            <C>
Net (loss) income                                                       $  (264,974)   $     6,550    $  (487,786)   $    43,000
Adjustments to reconcile net (loss) income to net cash
provided by (used in) operating activities and risk management
results:
  Amortization of mortgage servicing rights                                 171,797         97,092        427,451        297,279
  Depreciation and amortization                                              13,694         11,598         38,667         34,627
  Cumulative effect of a change in accounting for derivative                      -              -           (883)             -
     Instruments and hedging activities, net
  Change in fair value of net hedged assets                                  (5,758)             -        (11,269)             -
  Risk management of mortgage servicing rights                              525,280              -         17,219              -
  Valuation provision of mortgage servicing rights                          (75,280)             -        827,090              -
  Servicing losses on investor-owned loans                                    1,727          2,407          5,766          7,611
  Change in deferred income tax liability                                  (147,275)         8,917       (265,837)        31,529
  Origination, purchase and sale of loans held for sale, net of
      repayments                                                            (66,275)      (501,879)      (228,722)        22,609
  Change in accounts receivable                                              49,846        (88,372)        47,047       (127,669)
  Change in other assets and accounts payable and accrued liabilities      (182,421)        36,644        (55,699)       (17,903)
                                                                        -----------    -----------    -----------    -----------
Net cash provided by (used in) by operating activities and risk
management results                                                           20,361       (427,043)       313,044        291,083

CASH FLOWS USED IN INVESTING ACTIVITIES:

Purchase of premises and equipment, net                                      (6,314)        (5,546)       (17,999)       (18,989)
Acquisition of mortgage servicing rights                                   (320,563)      (229,255)    (1,055,349)      (587,429)
Net purchase of risk management contracts                                    26,746         80,567        240,201       (472,272)
Net early pool buyout reimbursements                                        (15,496)        30,773        (18,047)       153,953
                                                                        -----------    -----------    -----------    -----------
Net cash used in investing activities                                      (315,627)      (123,461)      (851,194)      (924,737)

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:

Net borrowings from banks                                                    51,500        200,600        150,600        135,800
Net (repayments) issuance of commercial paper                               500,000              -        500,000        336,097
Issuance of medium-term notes                                                     -        500,000        250,000        500,000
Issuance of notes payable                                                   123,000              -        123,000              -
Payment of debt issue costs                                                    (444)        (1,348)        (2,735)        (3,720)
Repayment of long-term debt                                                (263,950)      (250,225)      (264,111)      (310,669)
Dividends paid to the National                                              (24,000)       (24,000)       (48,000)       (48,000)
                                                                        -----------    -----------    -----------    -----------
Net cash provided by financing activities                                   386,106        425,027        708,754        609,508
Net increase (decrease) in cash and cash equivalents                         90,840       (125,477)       170,604        (24,146)
Cash and cash equivalents at beginning of period                            190,501        304,190        110,737        202,859
                                                                        -----------    -----------    -----------    -----------

Cash and cash equivalents at end of period                              $   281,341    $   178,713    $   281,341    $   178,713
                                                                        ===========    ===========    ===========    ===========

Supplemental disclosure of cash flow information:
Interest paid                                                           $    43,914    $    38,605    $   153,388    $   119,133
Income taxes paid                                                                 -    $         6    $        23    $       348
Income taxes refunded                                                   $         4              -    $        18    $     2,395
Impact of cash flow hedges on other comprehensive income, net           $     5,868              -    $     5,316              -

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


                                       5
<PAGE>




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


1.   BASIS OF PRESENTATION

The  accompanying  consolidated  financial  statements  have  been  prepared  in
accordance with generally accepted  accounting  principles for interim financial
information and with the  instructions to Form 10-Q and Rule 10-01 of Regulation
S-X.  Accordingly,  they do not include  all of the  information  and  footnotes
required by generally  accepted  accounting  principles  for complete  financial
statements.  In the opinion of management,  all adjustments considered necessary
for a fair  presentation  have  been  included.  The  preparation  of  financial
statements in conformity with generally accepted accounting  principles requires
management to make estimates and assumptions that affect the reported amounts of
assets,  liabilities,  revenues  and  expenses  and  the  disclosed  amounts  of
contingent  liabilities at the date of the financial statements.  Actual results
may differ from those estimates.

Operating results for the three- and nine-month  periods ended June 30, 2001 are
not  necessarily  indicative  of the results that may be expected for the fiscal
year  ending  September  30,  2001.  For  further  information,   refer  to  the
consolidated  financial  statements and footnotes  thereto  included in the Form
10-K for the fiscal year ended  September  30,  2000 of HomeSide  International,
Inc. See also Note A to the Index to the Form 10-Q/A above.


2.   RESTATEMENT

As announced on September 4, 2001, the Company  discovered an incorrect interest
rate assumption in the mortgage  servicing rights ("MSR")  valuation model which
caused  the  model to under  estimate  the MSR's  sensitivity  to  movements  in
interest rates,  particularly in a falling rate environment.  During the quarter
ended  December 31, 2000,  mortgage rates declined by 58 basis points from 7.88%
at September  30, 2000 to 7.30% at December 31, 2000 with  substantially  all of
the rate  movement  occurring in the second half of the quarter.  During the six
month period from December 31, 2000 to June 30, 2001,  mortgage rates  continued
to decline an  additional  10 basis  points to 7.20% at June 30,  2001.  Had the
valuation model included the correct interest rate  assumption,  the model would
have estimated faster loan prepayment speeds and, as a result, a lower valuation
of the mortgage servicing rights asset.

The correction of the incorrect  interest rate assumption  caused the Company to
determine that the inception  documentation  required to apply hedge  accounting
pursuant to Financial  Accounting  Standards No. 133, "Accounting for Derivative
and  Hedging   Activities"  (  "SFAS  133"),   was  inadequate  to  support  the
characteristics  of the hedged item and its  exposure to changes in hedged risk.
Therefore,  the Company  concluded that the application of hedge  accounting was
inappropriate for those derivative  instruments previously designed to hedge the
exposure to changes in the fair value of the mortgage servicing rights assets.

The Company recognized a loss of ($567.7) million to current earnings related to
the change in fair value of these  derivatives  for the three  months ended June
30, 2001,  and a gain of $66.9  million for the nine months ended June 30, 2001,
with no  corresponding  hedge offset relative to the change in the fair value of
the mortgage servicing rights.  Consequently,  the Company reversed a previously
recorded change in value of the mortgage  servicing rights due to hedged risk of
($389.0) million to earnings for the three months ended June 30, 2001 and $176.1
million  for the nine  months  ended  June  30,2001.  Pursuant  to the  guidance
provided under Financial Accounting Standards No. 140, "Accounting for Transfers
and Servicing of Financial  Assets and  Extinguishments  of Liabilities"  ("SFAS
140'),  the Company  subsequently  performed  an  impairment  evaluation  of the
mortgage  servicing  rights and recognized a decrease in valuation  provision of
$389.0  million to earnings for the three  months  ended June 30,  2001,  and an
additional  valuation provision of $497.4 million for the nine months ended June
30, 2001. Accordingly, the consolidated statement of income for the three months
ended June 30,  2001,  as  restated,  reflects  no net effect to current  period
earnings. For the nine months ended June 30, 2001, the consolidated statement of
income as restated,  reflects a pretax net reduction in net servicing  (expense)
revenue and pretax  income of ($321.3)  million and a related tax  (benefit)  of
($117.3) million,  for a net reduction in previously reported earnings of $204.0
million.





                                       6
<PAGE>





<TABLE>

The impact of the correction to the basis of the mortgage  servicing  rights for
the three months ended June 30, 2001, as set forth herein, is as follows:

Mortgage Servicing Rights Restatement
For the Three Months Ended June 30, 2001
(Dollars in millions)

                                                        Mortgage servicing    Restatement adjustments     Restated mortgage
                                                            rights as          to mortgage servicing      servicing rights
                                                       originally reported             rights
                                                               (1)
                                                       ----------------------------------------------------------------------
<S>                                                       <C>                     <C>                       <C>
Restated Beginning Balance at March 31, 2001              $  4,041.0              $     -                   $  4,041.0

Additions                                                      320.6                    -                        320.6
Change in value due to hedged risk                             389.0                 (389.0)                       -
Amortization                                                  (171.8)                   -                       (171.8)
Valuation provision                                           (313.7)                 389.0                       75.3
                                                       ----------------------------------------------------------------------
Ending Balance at June 30, 2001                           $  4,265.1              $     -                   $  4,265.1
                                                       ======================================================================


----------
<FN>
(1)  Ending Balance at June 30, 2001 is modified in accordance with the Restated
     Beginning  Balance at March 31,  2001.  Refer to Form 10-Q/A  filed for the
     quarterly period ended March 31, 2001 for additional  information regarding
     the Restated Beginning Balance at March 31, 2001.
</FN>

</TABLE>

3.   CASH AND CASH EQUIVALENTS

Cash and cash  equivalents  include  cash on hand  and cash due from  banks  and
interest-bearing  deposits  with an original  maturity of three  months or less.
Margin  deposits  associated  with  the risk  management  program  for  mortgage
servicing  rights  are  maintained  with   counterparties  and  the  Company  in
accordance with the requirements of  International  Swap Dealer  Agreements.  At
June 30, 2001,  the  Company's  net margin  deposits  with  counterparties  were
approximately  $176.9  million.  At September 30, 2000, the Company's net margin
deposits with counterparties totaled approximately $84.0 million.


4.   MORTGAGE SERVICING RIGHTS (Restated)

The  Company  capitalizes  the  rights to service  mortgage  loans for others as
assets,   whether  the  servicing   rights  are  retained  upon  sales  of  loan
originations or acquired through  purchases.  Mortgage  servicing rights are the
rights to receive a portion of the interest  coupon and fees  collected from the
mortgagor for performing  specified  servicing  activities.  Mortgage  servicing
rights are recorded by allocating the total cost of loans originated or acquired
between the loan sold and the servicing  right  retained based on their relative
fair values at the date of sale. The value of servicing  rights acquired through
bulk acquisitions is capitalized at cost.

The fair value of mortgage  servicing  rights is estimated  based on  discounted
future  net  cash  flows  using a third  party  vendor  prepayment  model  which
considers portfolio  characteristics  and assumptions  regarding interest rates,
delinquency rates,  ancillary  revenues and other economic factors.  The Company
continually monitors,  updates and revises, as necessary,  the major assumptions
and  modeling  techniques  used in  estimating  the fair  value of its  mortgage
servicing rights. Valuation model results are reviewed relative to market prices
of similar mortgage servicing assets, if available.

The net  carrying  value  of the  mortgage  servicing  rights  is  amortized  in
proportion to and over the period of the estimated net servicing revenue.

For  purposes of  evaluating  and  measuring  impairment  of mortgage  servicing
rights,  the Company  stratifies  its portfolio on the basis of the  predominant
risk  characteristics,  which include loan type and mortgage rate. Impairment is
recognized  to  earnings  through a valuation  provision  to the extent that the
carrying value of an individual stratum exceeds its estimated fair value.

As  restated,  in the  three-month  period  ended  June 30,  2001,  the  Company
recognized a $75.3 million increase to earnings through the valuation  provision
of mortgage  servicing rights. As restated,  in the nine-month period ended June
30, 2001, the Company  recognized a $827.1 million  decrease to earnings through
the valuation  provision of mortgage servicing rights. In the three-month period
ended June 30, 2001, the Company previously recognized a $313.7 million decrease
to earnings  through the valuation  provision of mortgage  servicing rights as a


                                       7
<PAGE>

result  of  unprecedented   refinancing   activity  and  extreme  interest  rate
volatility.  During the restatement process (see Note 2), the Company recognized
a $389.0  million  increase  to  earnings  through the  valuation  provision  of
mortgage  servicing rights for the three months ended June 30, 2001. The Company
recognized an increase in the valuation  provision of $497.4 million, a decrease
to earnings,  resulting in the total  valuation  provision of $827.1 million for
the nine-month period ended June 30, 2001. The change in the balance of mortgage
servicing rights was as follows (in thousands):

Balance, September 30, 2000                                          $4,464,312
Additions                                                             1,055,349

Amortization                                                           (427,451)
Valuation provision                                                    (827,090)
                                                                     -----------

Balance, June 30, 2001                                               $4,265,120
                                                                     ===========



5.   RISK  MANAGEMENT AND THE ACCOUNTING FOR DERIVATIVE  INSTRUMENTS AND HEDGING
     ACTIVITIES (Restated)

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

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

Effective with its first fiscal quarter  beginning  October 1, 2000, the Company
adopted  SFAS 133 as  required.  Accordingly,  all  derivative  instruments  are
recognized  on balance  sheet at fair value and are  either  designated  as fair
value hedges, cash flow hedges, or are non-designated  pursuant to the Company's
risk  management  policies.  At  October  1,  2000,  the  Company  recognized  a
cumulative-effect  transition  adjustment  of $1.4  million to increase  pre-tax
income for the effect of the change in accounting principle.  Additionally,  the
Company recognized a pre-tax  cumulative-effect  transition adjustment to reduce
OCI by $14.4 million. The transition adjustments are more fully explained in the
following  sections  along  with  the  risk  management   activities  and  hedge
accounting results for the three months and nine months ended June 30, 2001. The
impact of the accounting for risk management  activities pursuant to SFAS 133 is
expected to create a level of ongoing volatility in reported financial results.

Risk Management of Loan Production Activities

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


                                       8
<PAGE>


Mortgage Pipeline

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

The fair value of the Company's  IRLCs generally  approximate  zero at inception
(the lock-in date) since the Company's practice is to extend loan commitments at
market  rates of interest  and to exclude  from its fair value  calculation  the
normal profit margin associated with the future loan execution.  The future loan
execution  involves the sale of the loan and,  typically,  the  retention of the
servicing rights.  IRLCs have value  characteristics that are somewhat analogous
to certain  option  contracts in that the  commitments  tend to: (i) decrease in
value at an accelerating  rate as interest rates increase and the probability of
the  borrower's  loan  closing  increases,  and  (ii)  increase  in  value  at a
decelerating  rate  as  interest  rates  decline  and  the  probability  of  the
borrower's  loan closing  decreases.  The Company  manages the interest rate and
pricing  risks  associated  with its IRLCs by using  mortgage  forward  delivery
contracts,   options  on   mortgage-backed   securities  and  certain   treasury
instruments.  The Company's risk management program employs the use of financial
modeling to maintain a high degree of economic  correlation  between the changes
in values of the IRLCs and the related non-designated derivatives.  However, due
to  imprecisions  in projecting the timing and rate of loan closings  (which are
influenced by borrower behavior),  some level of economic ineffectiveness can be
expected.  Following  is a  summary  of the  net  gains/(losses)  recognized  on
non-designated  risk management  derivatives related to the pipeline at June 30,
2001 (in thousands):

<TABLE>

                                                                        For the three      For the nine
                                                                         months ended      months ended
                                                                        June 30, 2001      June 30, 2001
                                                                       ----------------- ------------------
<S>                                                                        <C>                <C>
(Losses)/Gains on IRLCs recognized to income                               $ (6,695)          $ 27,181

Gains/(Losses) on mortgage forward delivery contracts                         4,766            (18,601)
Gains on options contracts                                                    5,715              3,044
                                                                           --------           --------
   Total gains/(losses) recognized to income                                 10,481            (15,557)

Net gains recognized on non-designated derivatives                         $  3,786           $ 11,624
                                                                       ================= ==================
</TABLE>


Gains/(losses)  on interest rate lock commitments  represent the change in value
of the  commitments  from the rate-lock  inception date to the loan funding date
(for those  commitments that are funded),  or to the current  reporting date for
those IRLCs that are open at June 30,  2001.  The basis of the IRLCs at the loan
funding date,  representing cumulative gains or losses on the IRLCs, is included
as a  component  of the  initial  cost  basis of the loans.  Approximately  $1.0
million of the net losses  recognized  on IRLCs  (reported  for the three months
ended June 30, 2001,  above) were applied to the initial basis of the underlying
loans funded.  The balance of the losses totaling $5.7 million are recognized as
open derivative contracts at June 30, 2001 and are recorded at fair value in the
consolidated  balance  sheets.  The  net  gains  on  non-designated  derivatives
(related  to the  pipeline)  were  included as a  component  of risk  management
results in the  previously  filed Form 10-Q for the quarter ended June 30, 2001.
To  present  an   integrated   operational   perspective,   these  results  were
reclassified  and are now  included in net mortgage  origination  revenue in the
accompanying consolidated statements of income.

Mortgage Inventory

The Company's  mortgage inventory includes closed loans that are held for resale
pending  completion  of  normal   post-closing   review,   collateral   document
preparation  and other pooling  requirements  necessary to  consummate  the sale
and/or  securitization.  Based  on the  status  of such,  as well as  historical
delivery patterns and investor settlement dates, the Company is able to forecast
the amount and timing of loan sales. Approximately $1.4 billion of the Company's
loans at June  30,  2001 are  conforming  loans  which  have  been  underwritten
pursuant to the requirements of the secondary marketing agencies (FNMA, FHLMC or
GNMA as appropriate).  The Company's risk management program involves the use of
mortgage  forward  delivery  contracts  to  hedge  100%  of its  agency-eligible
conforming  loans as  forecasted  loan sales.  At June 30, 2001, a total of $1.4
billion of mortgage  forward  delivery  contracts  were  designated as cash flow
hedges.  At the  inception  of the hedge,  the Company  formally  documents  the
relationship  between the forward  delivery  contracts and the  forecasted  loan
sales as well as its risk management  objective and strategy for undertaking the
hedge  transactions.  The dollar amount of the forward delivery  contracts along
with the  underlying  rate and  terms of the  contracts  are  equivalent  to the

                                       9
<PAGE>

forecasted  loan  sales that are  probable  of  occurring.  Hence,  the  forward
delivery  contracts   effectively  fix  the  forward  sales  price  and  thereby
substantially eliminate interest rate and pricing risk to the Company.

Mortgage  loans  held for sale at June 30,  2001  include  non-conforming  loans
aggregating $280.6 million which will be sold to non-agency,  private investors.
During the three- and  nine-month  periods  ended June 30,  2001,  gains of $1.5
million and $1.3  million,  respectively,  on  non-designated  mortgage  forward
delivery  contracts  maintained as economic hedges of non-conforming  loans were
recorded to earnings and included as a component of risk  management  results in
the  previously  filed Form 10-Q for the quarter ended June 30, 2001. To present
an integrated operational  perspective,  these results were reclassified and are
now  included  in  net  mortgage   origination   revenue  in  the   accompanying
consolidated statements of income.

<TABLE>

The fair value of risk management  hedging  relationships at June 30, 2001 is as
follows (in thousands):

<S>                                                                                    <C>
Mortgage Pipeline:
IRLCs at period end                                                                    $  (5,732)
Non-designated mortgage forward delivery contracts                                         4,766
Options on mortgage-backed securities                                                      8,523
                                                                            ---------------------
   Total fair value of pipeline derivatives                                                7,557


Mortgage Inventory:
Designated mortgage forward delivery contracts                                             8,371
Non-designated mortgage forward delivery contracts                                         1,248
                                                                            ---------------------
   Total fair value of derivatives related to inventory                                    9,619

Net asset recorded for fair value derivatives                                          $  17,176
                                                                            =====================

</TABLE>


At June 30, 2001,  the carrying  value of mortgages  held for sale  approximated
fair value.  Cumulative gains related to the hedge  instruments in the amount of
$8.4 million were recorded in OCI at June 30, 2001 and will be  reclassified  to
earnings during the next 90 days, concurrent with the recognition in earnings of
the changes in cash flows of the forecasted loan sales.

Transition Adjustments and Current Period Activity in OCI

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

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









                                       10
<PAGE>

<TABLE>

Activity  in OCI  related  to cash  flow  hedges  of  forecasted  loan  sales is
summarized as follows for the nine-months ended June 30, 2001 (in thousands):

                                                                                                      Tax
                                                                                 Before-tax        (expense)       Net-of-tax
                                                                                   Amount         or benefit         amount
                                                                               ---------------- ---------------- ----------------
<S>                                                                                   <C>              <C>            <C>
Balance at September 30, 2000                                                        $      -       $      -       $       -
Cumulative effect of a change in accounting for hedging activities                    (14,383)         5,250          (9,133)
Net losses on current period cash flow hedges                                            (847)           310            (537)
Reclassification of losses to net income                                               14,361         (5,243)          9,118
                                                                               ---------------- ---------------- ----------------

Balance at March 31, 2001                                                            $   (869)      $    317       $    (552)
Net gains on current period cash flow hedges                                            8,492         (3,099)          5,393
 Reclassification of losses to net income                                                 748           (273)            475
                                                                               ---------------- ---------------- ----------------

Balance at June 30, 2001                                                             $  8,371       $ (3,055)      $   5,316
                                                                               ================ ================ ================
</TABLE>


Risk Management of Mortgage Servicing Rights

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

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

The Company employs statistical correlation techniques, both at the inception of
the hedge period and on an ongoing  basis,  to formally  assess its  expectation
that changes in the value of the derivative contracts are effectively correlated
to changes in the value of the hedged  asset or  liability.  Due to an incorrect
interest rate assumption in the mortgage  servicing  rights valuation model (see
Note 2), the Company  determined that the inception  documentation  required for
hedge  accounting  pursuant to SFAS 133 for the quarter  ended June 30, 2001 was
inadequate to support the characteristics of the hedged item and its exposure to
changes in hedged risk Therefore,  the Company concluded that the application of
hedge accounting was inappropriate for those derivative  instruments  previously
designed  to hedge the  exposure  to changes  in the fair value of the  mortgage
servicing  rights assets.  The Company  recognized a loss of ($567.7) million to
current  earnings  related to the change in fair value of these  derivatives for
the three months ended June 30, 2001,  and a gain of $66.9  million for the nine
months ended June 30, 2001. No corresponding hedge offset relative to the change
in the  fair  value of the  mortgage  servicing  rights  asset  was  recognized.
Consequently,  the Company reversed a previously recorded change in value of the
mortgage  servicing  rights  due to hedged  risk of $389.0  million  to  current
earnings  for the three  months  ended June 30, 2001 and $176.1  million for the
nine months  ended June 30,  2001.  The  Company  also  recorded  an  additional
valuation  provision  recovery  of  $389.0  million  related  to  an  impairment
evaluation  of mortgage  servicing  rights for the three  months  ended June 30,
2001,  and an  additional  valuation  provision  of $497.4  million for the nine
months ended June 30, 2001.

HomeSide's  risk  management  program  also  employs  the use of  non-designated
derivative contracts that are used to provide a level of economic offset against
the value changes  attributable  to the  non-designated  portfolios  that do not
qualify for hedge accounting treatment under SFAS 133. Additionally, the Company
is party to certain risk  management  strategies that are structured to mitigate
yield  curve  risk and to provide a level of  economic  offset to the time decay
(theta).  These non-designated  derivatives are marked-to-market with changes in
value  recorded to  earnings.  During the three  months  ended June 30, 2001 the
company  recognized a gain of $50.6 million to current  earnings  related to the
change  in fair  value of  these  non-designated  derivatives  and a loss in the
amount of $8.2 million  associated with excluded  components  relating to theta.
During the nine  months  ended June 30, 2001 the  company  recognized  a gain of
$10.3 million to current  earnings  related to the change in fair value of these
non-designated  derivatives and a loss in the amount of $94.4 million associated
with the excluded components relating to theta. Additionally,  the fair value of

                                       11
<PAGE>

the Company's  derivative  instruments  used in the risk  management of mortgage
servicing rights is ($347.4) million at June 30, 2001.

Risk Management of Corporate Funding

To meet its funding  requirements,  the Company  periodically issues fixed-rate,
medium-term  notes  which are  converted  to  floating-rate  debt as part of its
Corporate funding strategies.  As of the three months and nine months ended June
30, 2001, the Company had $750 million of fixed-rate, medium term notes that had
been  swapped to  floating  rates of interest  with  $750.0  million in notional
interest rate swaps.  The Company has designated the interest rate swaps as fair
value  hedges  of the  change  in value of the  medium-term  notes  due to LIBOR
interest rates. At the inception of the hedge,  the Company  formally  documents
the hedging relationships between the hedge instruments and the hedged items, as
well as the risk  management  objectives and strategy for  undertaking the hedge
transactions.  The medium-term notes are not prepayable and the key terms of the
interest  rate  swaps  are  equivalent  to  those  of  the  medium-term   notes.
Accordingly,  the Company expects that changes in the value of the interest rate
swaps will offset the changes in the value of the fixed-rate  debt  attributable
to LIBOR interest rates.  During the three months and nine months ended June 30,
2001,  the value of the interest rate swap  contracts  (decreased)/increased  by
$(0.8)  million and $24.4 million,  respectively,  and offset the changes in the
fair value of the  medium-term  notes due to the hedge  risk.  The fair value of
interest  rate swap  contracts  designated  as fair value hedges of  medium-term
notes was $24.2 million at June 30, 2001.

Termination of Hedging Relationships

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

Fair Value of Derivative Instruments

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

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

Other  Derivatives:  The Company uses certain  derivatives to economically hedge
the funding activities associated with government loans that are repurchased out
of GNMA (Government  National Mortgage  Association)  pools that the Company has
previously sold. However,  the Company does not designate a hedging relationship
for  these  derivatives  for  hedge  accounting   purposes.   Accordingly,   net
gains/(losses)  on these  derivatives of $0.5 million and $(0.2) million for the
three months and nine months ended June 30, 2001, respectively, were recorded to
income and included as a component of risk management  results in the previously
filed Form 10-Q for the quarter  ended June 30, 2001.  To present an  integrated
operational perspective, these results were reclassified and are now included as
a component  of other  income in the  accompanying  consolidated  statements  of
income.



                                       12
<PAGE>
<TABLE>


6.    NOTES PAYABLE

Notes payable consist of the following (in thousands):
                                                                            Weighted Average    Interest Rate
                                                                            ----------------    -------------
                                                    Total Outstanding       At Period End       During the Period
                                                    -----------------       -------------       -----------------
<S>                                                           <C>               <C>                   <C>
June 30, 2001:
Money market notes                                            $ 123,000         3.43%                 3.43%
Commercial paper                                              2,000,000         4.02%                 4.41%
National Australia Bank unsecured facility                    1,886,000         4.30%                 4.37%
                                                  ----------------------
  Total                                                      $4,009,000
                                                  ======================

September 30, 2000:
Commercial Paper                                            $ 1,500,000         6.63%                 6.16%
National Australia Bank Unsecured Facility                    1,735,400         6.70%                 6.25%
                                                  ----------------------
  Total                                                      $3,235,400
                                                  ======================
</TABLE>


On June  18,  2001,  HomeSide  Lending,  the  Company's  wholly-owned  operating
subsidiary, established a money market note program. As of June 30, 2001, $123.0
million in money  market  notes  were  outstanding.  Interest  is payable at the
maturity date of each money market note. The weighted  average  interest rate on
the money  market notes  during the  three-month  period ended June 30, 2001 was
3.43%.

HomeSide Lending has an established commercial paper program, which is supported
by an independent  syndicate of banks under a credit facility. On March 19, 2001
this  commercial  paper program was increased from $1.5 billion to $2.0 billion.
The weighted average interest rates on commercial paper  outstanding  during the
three-  and  nine-month  periods  ended  June 30,  2001 were  4.41%  and  5.41%,
respectively.  On October 16, 2000, HomeSide Lending entered into a $1.5 billion
back-up credit facility.  This agreement  replaces HomeSide  Lending's  previous
bank credit  facility and will terminate on October 15, 2002.  Borrowings  under
the credit  facility bear  interest at rates per annum,  based on, at HomeSide's
option, (i) the Eurodollar rate plus an applicable  margin,  (ii) the greater of
the federal funds rate plus an applicable margin or the prime rate, (iii) in the
case of swingline  loans, the federal funds rate plus an applicable  margin,  or
(iv) in the case of competitive bid loans, the lowest competitive  Eurodollar or
fixed rate  submitted by a bidding  lender.  The primary  purpose of this credit
facility  is to  provide  liquidity  back-up  for  HomeSide's  commercial  paper
program. The outstanding commercial paper reduces available borrowings under the
credit facility.  At June 30, 2001, there were no amounts  outstanding under the
credit facility.

In June 1998,  HomeSide  Lending  entered  into an  unsecured  revolving  credit
facility  with the  National to provide  short-term  funding up to $2.0  billion
(increased in 1999 to $2.5 billion), subject to limits imposed by the National's
regulatory authorities. Borrowings under the credit facility may be overnight or
for periods of 7,30,60 or 90 days. For overnight  borrowings,  the interest rate
is  determined by the National at the time of the  borrowing.  For LIBOR - based
borrowings,  the interest rate is charged at the  corresponding  LIBOR rate. The
weighted  average  interest  rate on  outstanding  borrowings  under this credit
facility during the three- and nine-month periods ended June 30, 2001 were 4.37%
and 5.51%, respectively.










                                       13
<PAGE>

7.    LONG-TERM DEBT

Medium-term notes
<TABLE>

As of June 30, 2001,  outstanding  medium-term  notes issued by HomeSide Lending
under  a  $3.568  billion  shelf  registration  statement  were as  follows  (in
thousands):

         Issue Date              Outstanding Balance            Coupon Rate               Maturity Date
         ----------              -------------------            -----------               -------------

<S>                                     <C>                        <C>                      <C>
June 30, 1997                           $  200,000                 6.88%                    June 30, 2002
June 30, 1997                               40,000                 6.82%                    July 2, 2001
July 1, 1997                                15,000                 6.86%                    July 2, 2001
July 31, 1997                              200,000                 6.75%                    August 1, 2004
September 15, 1997                          45,000                 6.77%                    September 17, 2001
May 22, 1998                               225,000                 6.20%                    May 15, 2003
June 9, 2000                               215,000                 7.07% *                  June 10, 2002
June 9, 2000                               200,000                 6.89% *                  April 9, 2002
June 9, 2000                                85,000                 7.07% *                  June 10, 2002
August 1, 2000                              75,000                 6.97% *                  August 1, 2002
September 14, 2000                          75,000                 6.79% *                  September 16, 2002
September 14, 2000                          60,000                 6.94% *                  September 15, 2003
September 14, 2000                          25,000                 7.00%                    September 16, 2002
September 15, 2000                         100,000                 6.79% *                  September 16, 2002
September 15, 2000                          50,000                 6.86% *                  September 16, 2002
December 4, 2000                           125,000                 6.98% *                  December 4, 2002
December 4, 2000                            75,000                 6.98% *                  December 4, 2002
December 4, 2000                            50,000                 6.87% *                  December 4, 2002
                              ---------------------------
  Total                                 $1,860,000
                              ===========================

----------
<FN>
*  Represents initial interest rate for floating rate note
</FN>
</TABLE>


As of June 30, 2001,  the  outstanding  fixed rate  medium-term  notes of $750.0
million had been  effectively  converted  by interest  rate swap  agreements  to
floating-rate  notes.  During the three  months and nine  months  ended June 30,
2001,  the value of the interest rate swap  contracts  (decreased)/increased  by
$(0.8)  million and $24.4 million,  respectively,  and offset the changes in the
fair value of the  medium-term  notes due to the hedge  risk.  The fair value of
interest  rate swap  contracts  designated  as fair value hedges of  medium-term
notes was $24.2  million  at June 30,  2001.  See note 5. The  weighted  average
borrowing  rates  on  medium-term   borrowings  issued  during  the  three-  and
nine-month  periods  ended June 30, 2001,  including  the effect of the interest
rate swap agreements, were 5.75% and 6.32%, respectively.  Net proceeds from the
issuances were primarily used to reduce the amounts  outstanding  under the bank
credit agreement and fund mortgage servicing rights.

Mortgage note payable

In connection with the acquisition of BancBoston Mortgage Corporation,  HomeSide
Lending  assumed a mortgage note payable that is due in 2017 and bears  interest
at a stated rate of 9.5%.  HomeSide Lending's main office building is pledged as
collateral for the mortgage note payable. The balance of the mortgage payable at
June 30, 2001,  including the fair value  adjustments  resulting from the merger
with the National, was $21.8 million.

11.25% Notes

As of March 31, 2001, the Company had $130.0  million  outstanding on a previous
issue of 11.25% notes (the "Notes")  with a maturity  date of May 15, 2003.  The
balance of the Notes at March 31,  2001,  including  the fair  value  adjustment
resulting from the merger with the National,  was $139.5 million. The Notes were
redeemable at the option of the Company,  in whole or in part, at any time on or
after May 15, 2001,  at certain  fixed  redemption  prices.  On May 16, 2001 the
Company  redeemed  the  11.25%  notes at the  redemption  price set forth in the
Notes.  The  Company  recognized  a $1.0  million  after  tax gain on the  early
extinguishment  of the debt, which is disclosed as an extraordinary  item on the
accompanying consolidated statements of income.


                                       14
<PAGE>

8.    SUBSEQUENT EVENTS (Restated)


On July 24, 2001,  National  Australia  Bank  Limited,  the  ultimate  parent of
HomeSide, by and through various intermediate holding companies,  entered into a
stock  subscription  agreement with HomeSide in the amount of $150.0 million for
the issuance of additional  shares of HomeSide  common stock.

On July 31, 2001,  HomeSide and the National  amended their unsecured  revolving
credit  facility and changed  National's  funding limit to $2.42 billion through
January 2002, and $1.92 billion thereafter.


9.   NEW ACCOUNTING STANDARDS

In July 2001,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards No. 141, "Business  Combinations"  ("SFAS 141")
which supercedes APB No.16 "Business  Combinations" and SFAS 38, "Accounting for
Preacquisition  Contingencies  of Purchased  Enterprises".  SFAS 141 changes the
existing  accounting  treatment  for  business  combinations  to allow  only the
purchase method.  The statement applies to all business  combinations  initiated
after June 30, 2001.  The  statement  also applied to all business  combinations
accounted  for using the purchase  method for which the date of  acquisition  is
July 1,  2001,  or  later.  Management  does not  expect  the  adoption  of this
statement to have a material impact on the financial statements.

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

In July 2001,  the Securities and Exchange  Commission  issued Staff  Accounting
Bulletin No. 102 ("SAB 102") which expresses certain of the staff's views on the
development,  documentation  and  application  of a systematic  methodology  for
determining  allowances  for loan and lease losses in accordance  with generally
accepted  accounting  principles.  In  particular,  the guidance  focuses on the
documentation  the staff  normally  would  expect  registrants  to  prepare  and
maintain in support of their  allowances  for loan losses.  Management  believes
that it is currently in compliance with the requirements of SAB 102.


10.    DIVIDENDS

On April 2, 2001 the Company  paid  dividends  to the  National in the amount of
$24.0 million. On October 23, 2000 the Company paid dividends to the National in
the amount of $24.0 million.



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

General

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

HomeSide's   strategy   emphasizes   variable  cost  and  diversified   mortgage
origination,   efficient  servicing,  and  risk  management.   Headquartered  in
Jacksonville, Florida, HomeSide ranks as the 10th largest originator and the 6th
largest  servicer in the United States at June 30, 2001, based on data published
by Inside Mortgage Finance.



                                       15
<PAGE>

HomeSide's  strategy has been to continue to expand its core operations  through
(i) improved economies of scale in servicing;  (ii) increased productivity using
proprietary  technology;  and  (iii)  expanded  and  diversified  variable  cost
origination  channels.  In addition,  HomeSide has pursued additional  portfolio
acquisitions and strategic  origination  relationships with mortgage lenders and
other entities that offer similar financial services.

Operating  results for the three and nine-month  periods ended June 30, 2001 are
not  necessarily  indicative  of the results that may be expected for the fiscal
year  ending  September  30,  2001.  For  further  information,   refer  to  the
consolidated  financial  statements and footnotes  thereto  included in the Form
10-K for the fiscal year ended September 30, 2000 of HomeSide Lending, 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  and  hedging
relationships.  These  risks and  uncertainties  are more fully  detailed in the
Company's filings with the Securities and Exchange Commission.

   Loan Production Activities

HomeSide  participates  in several  origination  channels,  including  wholesale
origination  (correspondent,   co-issue,  and  broker)  and  direct  origination
(HomeSide   Solutions)   channels.   The  direct  channels   include   internet,
telemarketing,  direct  mail,  and  mortgages  related  to  affinity  group  and
co-branding partnerships.  HomeSide also purchases servicing rights in bulk from
time to time.  HomeSide's  strategy  is to  customarily  sell all loans  that it
originates or purchases while retaining the servicing rights to such loans. This
multi-channel   production  base  provides  access  to  and  flexibility   among
production  channels in a wide  variety of market and  economic  conditions.  By
focusing on production channels with a variable cost structure, HomeSide reduces
the  fixed  costs  associated  with  traditional  mortgage  branch  offices.  By
minimizing  the burden of high  fixed cost  origination  overhead,  HomeSide  is
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- and nine-month  periods ended June 30, 2001
and 2000 (in millions):
<TABLE>


                                             For the Three        For the Three        For the Nine       For the Nine
                                              Months Ended         Months Ended        Months Ended       Months Ended
                                             June 30, 2001        June 30, 2000       June 30, 2001       June 30, 2000
                                            -----------------     ---------------     ---------------    ----------------
        <S>                                          <C>                 <C>                <C>                  <C>
        Correspondent                                $ 5,487             $ 2,169            $ 11,682             $ 6,448
        Co-issue                                       4,862               1,939              12,393               6,011
        Broker                                         1,379                 540               3,159               1,352
                                            -----------------     ---------------     ---------------    ----------------
          Total wholesale                             11,728               4,648              27,234              13,811
        Direct (HomeSide Solutions)                      483                 169                 989                 445
                                            -----------------     ---------------     ---------------    ----------------
          Total production                            12,211               4,817              28,223              14,256
        Bulk acquisitions                                  -               5,152              15,261              12,176
                                            -----------------     ---------------     ---------------    ----------------
          Total production and
            Acquisitions                             $12,211              $9,969             $43,484             $26,432
                                            =================     ===============     ===============    ================
</TABLE>


Total loan  production,  excluding  bulk  acquisitions,  increased  153% and 98%
respectively  for the three and nine months ended June 30, 2001 compared to June
30,  2000.  The  increase  was a function  of  HomeSide's  ability  to  leverage
origination  alliances,  technological  enhancements  and influences from a more
favorable  interest rate environment.  When interest rates decline,  the size of
the  mortgage  origination  market  increases  as home  ownership  becomes  more
affordable and as existing mortgagors  refinance their loans. For the three- and
nine-month   periods  ended  June  30,  2001,   refinances  were  56%  and  46%,
respectively,  of  HomeSide's  production  volume,  compared  to  19%  and  21%,
respectively, for the three and nine month periods ended June 30, 2000.


                                       16
<PAGE>

Economies of scale are vital to the  long-term  viability of mortgage  servicing
and are increasingly  important to remain competitive in the industry.  Although
HomeSide did not close on any bulk acquisitions during the quarter,  the Company
continues to pursue growth  opportunities  through bulk acquisitions of mortgage
servicing  rights and  through  its  Preferred  Partnership  program.  Preferred
partnerships  generally  include a bulk  servicing  acquisition  and an  ongoing
mortgage origination flow. HomeSide services loans on a priority basis on behalf
of its  Preferred  Partners and offers the customer  mortgage-related  products.
Preferred Partner relationships  contributed 18% of HomeSide's production volume
for the nine months ended June 30, 2001.

Servicing Portfolio

Based on certain industry servicing statistics, management asserts 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 $187.4 billion,
HomeSide services the loans of approximately 2.1 million  homeowners from across
the United  States and is committed to  protecting  the  associated  asset value
through its risk management strategy. HomeSide's focus on efficient and low cost
processes  is  pursued  through  the  selective  use  of  automation,  strategic
outsourcing   of  selected   servicing   functions  and  effective   control  of
delinquencies and foreclosures.

The following  information  on the dollar amounts of loans serviced is presented
to aid in  understanding  the results of operations  and financial  condition of
HomeSide for the three- and nine-month  periods ended June 30, 2001 and 2000 (in
millions):
<TABLE>


                                               For the Three         For the Three        For the Nine        For the Nine
                                               Months Ended          Months Ended         Months Ended        Months Ended
                                               June 30, 2001         June 30, 2000        June 30, 2001      June 30, 2000
                                             ------------------    ------------------ -- ---------------- -- ---------------
      <S>                                            <C>                   <C>                 <C>                <C>
      Balance at beginning of
        Period                                       $ 189,408             $ 152,501           $ 173,310          $ 145,552
         Additions, net                                 12,148                 9,882              43,376             26,266
         Scheduled amortization                          1,386                 1,079               3,911              3,162
         Prepayments                                    12,546                 4,207              24,737             11,009
         Foreclosures                                      214                   266                 628                816
                                             ------------------    ------------------    ----------------    ---------------
             Total reductions                           14,146                 5,552              29,276             14,987
                                                                   ------------------    ----------------    ---------------
                                             ------------------
      Balance at end of period                       $ 187,410             $ 156,831           $ 187,410          $ 156,831
                                             ==================    ==================    ================    ===============

</TABLE>

The  number  of loans  serviced  at June  30,  2001 was  2,068,773  compared  to
1,772,999  at  June  30,  2000.  HomeSide's  strategy  is to grow  its  mortgage
servicing   portfolio  by   concentrating  on  variable  cost  loan  origination
strategies and selective portfolio  acquisitions,  and as a result, benefit from
improved  economies of scale. A key to HomeSide's  future growth is the capacity
provided by its proprietary  servicing software.  This system allows HomeSide to
double the number of loans  typically  serviced  on a single  system and is also
used by the National to service its growing loan portfolio.


Results of Operations (Restated)

For the three months ended June 30, 2001 compared to the three months ended June
30, 2000

   Summary (Restated)

Restated net (loss) income was ($265.0)  million for the three months ended June
30, 2001, compared to $6.6 million for the three months ended June 30, 2000. The
$271.6 million decrease is primarily due to the impact of the loss caused by the
change in value of the  derivatives  determined  to no longer  qualify for hedge
accounting.  Restated total (expenses)  revenues for the three months ended June
30, 2001 of ($330.7)  million compared to total revenue of $82.4 million for the
three months ended June 30, 2000. The $413.1 million  decrease was primarily due
to the  impact  of the loss  caused by the  change  in value of the  derivatives
determined  to no longer  qualify for hedge  accounting.  Restated net servicing
(expense) revenue resulted in a net expense of ($396.9)  million,  a decrease of
$482.4  million  compared to net revenue of $85.5  million for the three  months
ended June 30,  2000.  This change was  primarily  due to the impact of the loss
caused by the change in value of the derivatives determined to no longer qualify
for hedge  accounting.  Net interest expense decreased to ($5.8) million for the
three  months  ended June 30,  2001,  compared to ($18.2)  million for the three
months ended June 30, 2000. This 68% decrease resulted primarily from a decrease
in interest  rates,  widening of the spread  between  short-term  and  long-term
interest rates and was partially  offset by the growth of HomeSide's net assets.
Net mortgage  origination  revenue increased from $13.6 million to $67.7 million
primarily due to declining  mortgage interest rates, which resulted in increased
production  volumes and margins.  Total  expenses  increased  24% as a result of
higher expenses  associated with the increase in production  volumes,  growth of

                                       17
<PAGE>

the servicing  portfolio,  and higher  prepayment  activity.  Income tax expense
decreased  as a result of the net loss  primarily  due to the impact of the loss
caused by change in value of the derivatives determined to no longer qualify for
hedge accounting.

Net Servicing (Expense) Revenue (Restated)

The  Company  incurred a net expense of  ($396.9)  million for the three  months
ended June 30,  2001  compared  to net  revenue of $85.5  million  for the three
months  ended June 30, 2000.  Net  servicing  (expense)  revenue is comprised of
mortgage  servicing  fees net of guaranty  fees,  ancillary  servicing  revenue,
amortization  and  valuation  provision of mortgage  servicing  rights,  and the
earnings impact of risk management of the mortgage servicing rights.

Mortgage  servicing  fees  increased 23% to $224.9  million for the three months
ended June 30, 2001  compared to $182.5  million for the three months ended June
30, 2000,  primarily as a result of portfolio  growth.  The servicing  portfolio
increased  $30.6  billion to $187.4  billion at June 30, 2001 compared to $156.8
billion at June 30, 2000, a 19% increase.  The growth in the servicing portfolio
was primarily due to the increase in production volumes resulting from declining
mortgage rates. HomeSide's weighted average interest rates of the mortgage loans
in the servicing  portfolio for the  three-month  period were 7.56% and 7.53% at
June 30, 2001 and 2000, respectively. The weighted average servicing fee, net of
guaranty fees and including  ancillary income,  for the servicing  portfolio was
47.9 basis  points for the three  months  ended June 30,  2001  compared to 47.3
basis points for the three months ended June 30, 2000.

Amortization  expense increased 77% to $171.8 million for the three months ended
June 30, 2001  compared to $97.1  million  for the three  months  ended June 30,
2000. The increase in amortization  expense was primarily due to acceleration of
projected prepayment speeds associated with declining mortgage interest rates. A
decline  in  mortgage  interest  rates  results  in an  increase  in  prepayment
estimates used in calculating periodic  amortization  expense.  Because mortgage
servicing  rights are  amortized  over the  expected  period of net  service fee
revenues,  an increase in mortgage  prepayment  activity  typically results in a
shorter estimated life of the mortgage servicing assets and, accordingly, higher
amortization expense. See Note 4 to the Consolidated Financial Statements.

Restated  valuation  provision  of  mortgage  servicing  rights  income of $75.3
million  for the  three  months  ended  June 30,  2001 is  primarily  due to the
reduction in provision for the mortgage  servicing rights as described in detail
in the Risk Management of Mortgage Servicing Rights below.

Restated risk  management  of mortgage  servicing  rights  (expense) of ($525.3)
million is primarily due to the $567.7 million loss on derivatives determined to
no longer  qualify for hedge  accounting , as described in detail in the section
on Risk Management of Mortgage  Servicing Rights in Note 5, "Risk Management and
the Accounting for Derivative Instruments and Hedging Activities".

Net Interest Expense

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

Loan  refinancing  levels are the largest  contributor to changes in the size of
the mortgage  origination  market.  As interest  rates  decline,  more borrowers
refinance their mortgages,  resulting in an increase in the mortgage origination
market.  Higher loan  production  volumes result in higher  average  balances of
mortgages held for sale and  consequently  higher levels of the interest  income
from  interest  earned on such loans prior to their sale.  This higher  level of
interest income due to increased  volume 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,  net interest revenue is also influenced by
the spread between long-term and short-term interest rates.

Net interest  expense  decreased 68% from ($18.2)  million to ($5.8) million for
the three months ended June 30, 2001 compared to the three months ended June 30,
2000.  The decrease in net interest  expense was  primarily due to a widening of
the  spread  between  short-term  and  long-term  rates  partially  offset by an
increase in net assets due to higher production volumes and servicing  portfolio
growth.  During the three months ended June 30,  2001,  the spread  between long
term  average  mortgage  rates and short  term LIBOR  rates  widened by 85 basis
points as compared to the three months ended June 30, 2000.


                                       18
<PAGE>




Net Mortgage Origination Revenue

Net mortgage  origination revenue is comprised of fees earned on the origination
of mortgage  loans,  fees charged to review loan  documents for  purchased  loan
production,  gains  and  losses  on the sale of  loans,  and  reclassified  risk
management hedge results. Net mortgage origination revenue was $67.7 million for
the three  months  ended June 30, 2001  compared to $13.6  million for the three
months ended June 30, 2000.  The  increase was  primarily  due to an increase in
production volumes and margins resulting from the factors  previously  discussed
in the loan production activities section.

Other Income

Other income for the three months ended June 30, 2001 was $4.2 million  compared
to $1.5  million for the three  months  ended June 30,  2000.  This  increase is
primarily  due to  the  amortization  of  the  deferred  gain  resulting  from a
sale-leaseback  transaction involving HomeSide's facility in San Antonio,  Texas
entered into on October 2, 2000.  In  accordance  with SFAS 98  "Accounting  for
Leases",  HomeSide  recognized an immediate  gain of $4.5 million and recorded a
deferred gain of $7.3 million which is amortized over the life of the lease.

Salaries and Employee Benefits

Salaries and employee  benefits  expense was $38.1  million for the three months
ended June 30, 2001  compared to $27.9  million for the three  months ended June
30, 2000, a 37% increase.  The average number of full-time  equivalent employees
was 2,700 for the three  months  ended June 30,  2001  compared to 2,365 for the
three  months  ended June 30,  2000.  This  increase is  attributable  to higher
production volumes resulting in higher  commissions,  incentives and an increase
in temporary and overtime staff.

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, 2001 was $10.4  million  compared to $7.7 million for the
three  months ended June 30,  2000,  a 36%  increase.  The increase is driven by
additional  leased space and  technology  related assets in support of growth in
the 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 $8.9  million for the three months ended June 30, 2001  compared to $9.1
million  for the three  months  ended June 30,  2000.  The  decrease  was mainly
attributable  to a decline  in per unit  servicing  losses  for the  three-month
period.

Included in the balance of accounts payable and accrued  liabilities at June 30,
2001 is a reserve for  estimated  servicing  losses on  investor-owned  loans of
$16.7 million.  The reserve has been established for potential losses related to
the  mortgage  servicing  portfolio.  Increases  to the  reserve  are charged to
earnings as servicing losses on  investor-owned  loans. The reserve is decreased
for  actual  losses  incurred  related  to  the  mortgage  servicing  portfolio.
HomeSide's  historical loss experience on VA loans generally has been consistent
with  industry  experience.  Management  believes  that HomeSide has an adequate
level of  reserve  based on  servicing  volume,  portfolio  composition,  credit
quality and historical loss rates, as well as estimated future losses.








                                       19
<PAGE>

<TABLE>

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

                        Servicing Portfolio Delinquencies
                             (percent by loan count)

                                                                                    June 30, 2001          June 30, 2000
                                                                                 --------------------    -------------------
Servicing Portfolio Delinquencies, excluding bankruptcies (at end of period)
          <S>                                                                           <C>                    <C>
          30 days                                                                       3.08%                  2.46%
          60 days                                                                       0.60%                  0.50%
          90+ days                                                                      0.38%                  0.44%
                                                                                 --------------------    -------------------
               Total past due                                                           4.06%                  3.40%
                                                                                 ====================    ===================

          Foreclosures pending                                                          0.65%                  0.47%
                                                                                 ====================    ===================

</TABLE>

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  were $16.9  million for the three  months  ended June 30, 2001,
compared  to $13.3  million  for the three  months  ended June 30,  2000,  a 27%
increase.  The  increase  was  primarily  driven by higher  production  volumes,
servicing portfolio growth, and an increase in prepayment activity.

Income Tax (Benefit) Expense

HomeSide's  income tax  (benefit)  expense  was  ($147.8)  million for the three
months  ended June 30, 2001  compared to $8.9 million for the three months ended
June 30, 2000. The effective income tax rates for the three-month  periods ended
June 30,  2001 and 2000  were 36% and 58%,  respectively.  The  decrease  in the
income tax (benefit)  expense was due to a net loss resulting from the change in
the valuation provision of mortgage servicing rights offset by losses recognized
from the change in value of the derivatives  determined to no longer qualify for
hedge accounting.


Results of Operations (Restated)

For the nine months  ended June 30, 2001  compared to the nine months ended June
30, 2000

   Summary (Restated)

Restated net (loss)  income was ($487.8)  million for the nine months ended June
30, 2001, compared to $43.0 million for the nine months ended June 30, 2000. The
$530.8  million  decrease  is  primarily  due to  the  impact  of the  valuation
provision for the mortgage  servicing  rights driven by the  acceleration of the
projected  prepayment speeds associated with declining  mortgage interest rates.
Restated  total  (expenses)  revenues for the nine months ended June 30, 2001 of
($520.5) million compared to total revenue of $267.8 million for the nine months
ended June 30, 2000. The $788.3 million decrease was primarily due to the impact
of the  valuation  provision  for the mortgage  servicing  rights.  Restated net
servicing  (expense)  revenue resulted in a net expense of ($618.4)  million,  a
decrease of $860.5  million  compared  to net revenue of $242.1  million for the
nine months ended June 30, 2000.  This change was primarily due to the impact of
the valuation  provision for the mortgage servicing rights. Net interest expense
increased to ($43.8)  million for the nine months ended June 30, 2001,  compared
to ($30.5)  million for the nine months ended June 30,  2000.  This 44% increase
resulted  primarily  from a narrowing of the average  period-over-period  spread
between  short-term  and long-term  interest  rates and the growth of HomeSide's
assets.  Net mortgage  origination  revenue  increased  147% for the nine months
ended June 30, 2001  compared to the nine months  ended June 30, 2000  primarily
due to declining mortgage interest rates which resulted in increased  production
volume and margins.  Total  expenses of $235.6 million for the nine months ended
June 30,  2001  compared to $195.3  million  for the nine months  ended June 30,
2000, an increase of 21%, was a result of higher  expenses  associated  with the
increase in  production  volumes,  the growth of the  servicing  portfolio,  and
higher prepayment activity.  Income tax expense decreased as a result of the net
loss due to the impact of risk  management  results (SFAS 133) and provision for
mortgage servicing rights recognized in earnings.


                                       20
<PAGE>



Net Servicing (Expense) Revenue (Restated)

The Company incurred a net expense of ($618.4) million for the nine months ended
June  30,2001,  compared  to net  revenue of $242.1  million for the nine months
ended June 30, 2000.  Net servicing  (expense)  revenue is comprised of mortgage
servicing fees net of guaranty fees,  ancillary servicing revenue,  amortization
and valuation provision of mortgage servicing rights, and the earnings impact of
risk management of mortgage servicing rights.

Mortgage  servicing  fees  increased  21% to $653.4  million for the nine months
ended June 30, 2001  compared to $539.4  million for the nine months  ended June
30, 2000, primarily as a result of portfolio growth. HomeSide's weighted average
interest  rates  of the  mortgage  loans  in the  servicing  portfolio  for  the
nine-month period were 7.59% and 7.53% at June 30, 2001 and 2000,  respectively.
The weighted average servicing fee, net of guaranty fees and including ancillary
income,  for the  servicing  portfolio was 47.2 basis points for the nine months
ended June 30, 2001 compared to 47.6 basis points for the nine months ended June
30, 2000.

Amortization  expense was $427.5 million for the nine months ended June 30, 2001
compared  to $297.3  million  for the nine  months  ended June 30,  2000,  a 44%
increase.  The  increase  in  amortization  expense  was  primarily  due  to the
accelerated  projected  prepayment  speeds  associated  with declining  mortgage
interest rates. A decrease in mortgage  interest rates results in an increase in
prepayment estimates used in calculating periodic amortization expense.  Because
mortgage  servicing rights are amortized over the expected period of service fee
revenues,  an increase in mortgage  prepayment  activity  typically results in a
shorter estimated life of the mortgage servicing assets and, accordingly, higher
amortization expense. See Note 3 to the Consolidated Financial Statements.

Restated  valuation  provision of mortgage  servicing rights of ($827.1) million
for the nine months ended June 30, 2001 is primarily  due to the  impairment  of
the mortgage  servicing  rights as described in detail in the Risk Management of
Mortgage Servicing Rights below.

Restated  risk  management  of mortgage  servicing  rights  (expense) of ($17.2)
million for the nine months  ended June 30, 2001 is  primarily  due to the $66.9
million gain on derivatives determined to no longer qualify for hedge accounting
offset  by the  $94.4  million  loss  associated  with the  excluded  components
relating  to theta.  More detail  regarding  these  items are  described  in the
section  on Risk  Management  of  Mortgage  Servicing  Rights  in Note 5,  "Risk
Management  and  the  Accounting   for   Derivative   Instruments   and  Hedging
Activities".

Net Interest Expense

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

Loan  refinancing  levels are the largest  contributor to changes in the size of
the mortgage  origination  market.  As interest  rates  decline,  more borrowers
refinance their mortgages,  resulting in an increase in the mortgage origination
market.  Higher loan  production  volumes result in higher  average  balances of
mortgages held for sale and  consequently  higher levels of the interest  income
from  interest  earned on such loans prior to their sale.  This higher  level of
interest income due to increased  volume 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  expense  increased 44% from ($30.5) million to ($43.8) million for
the nine months  ended June 30, 2001  compared to the nine months ended June 30,
2000.  The increase in net interest  expense was primarily due to a narrowing of
the spread between  short-term and long-term rates and an increase in net assets
due to higher production  volumes and servicing  portfolio growth.  For the nine
months  ended June 30, 2001,  average  mortgage  rates  declined 91 basis points
while  average  short-term  LIBOR  rates  decreased  55  basis  points,  thereby
tightening  spreads by 36 basis points as compared to the nine months ended June
30, 2000.  Although the  decrease in  short-term-rates  influenced a widening of
spreads in the most recent  quarter,  average  spreads for the nine months ended
June 30,  2001 were  down to 176 basis  points  versus an  average  of 212 basis
points for the nine months ended June 30, 2000.

Net Mortgage Origination Revenue

Net mortgage  origination revenue is comprised of fees earned on the origination
of mortgage  loans,  fees charged to review loan  documents for  purchased  loan
production,  gains  and  losses  on the sale of  loans,  and  reclassified  risk
management hedge results.  Net mortgage  origination  revenue was $129.9 million
for the nine months ended June 30, 2001  compared to $52.5  million for the nine
months ended June 30, 2000.  The  increase was  primarily  due to an increase in


                                       21
<PAGE>

production volumes and margins resulting from the factors  previously  discussed
in the loan production activities section.

 Other Income

Other income for the nine months ended June 30, 2001 was $11.8 million  compared
to $3.6 million for the nine months ended June 30, 2000. This increase primarily
resulted from a sale-leaseback  transaction involving HomeSide's facility in San
Antonio,  Texas  entered  into on October 2, 2000.  In  accordance  with SFAS 98
"Accounting for Leases",  HomeSide  recognized an immediate gain of $4.5 million
and recorded a deferred gain of $7.3 million which is amortized over the life of
the lease.

Salaries and Employee Benefits

Salaries and employee  benefits  expense was $100.6  million for the nine months
ended June 30, 2001 compared to $83.6 million for the nine months ended June 30,
2000, a 20% increase.  The average number of full-time  equivalent employees was
2,522 for the nine  months  ended June 30,  2001  compared to 2,463 for the nine
months ended June 30, 2000.

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 nine
months ended June 30, 2001 was $29.6  million  compared to $24.0 million for the
nine months  ended June 30,  2000,  a 23%  increase.  The  increase is driven by
additional  leased space and  technology  related assets in support of growth in
the 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  $27.1 million for the nine months ended June 30, 2001 compared to $24.8
million for the nine months  ended June 30, 2000.  The  increase  was  primarily
attributable  to an increase in  servicing  losses  related to the growth of the
servicing portfolio.

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  were $51.9  million  for the nine months  ended June 30,  2001,
compared  to $36.0  million  for the nine  months  ended  June 30,  2000,  a 44%
increase.  The increase is primarily  due to an increase in expenses  associated
with higher production volumes and an increase in prepayment activity.

Income Tax (Benefit) Expense (Restated)

HomeSide's  restated income tax (benefit)  expense was ($266.4)  million for the
nine months  ended June 30, 2001  compared to $29.5  million for the nine months
ended June 30, 2000. The effective  income tax rates for the nine-month  periods
ended June 30, 2001 and 2000 were 35% and 41%, respectively. The decrease in the
income tax (benefit)  expense was due to a net loss resulting from the impact of
the valuation  provision of mortgage servicing rights and losses recognized from
the change in value of the derivatives determined to no longer qualify for hedge
accounting.


Risk Management Activities (Restated)

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



                                       22
<PAGE>

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

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

Risk Management of Market Risk

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

As more fully  discussed in the notes to the financial  statements,  the Company
adopted  SFAS No.  133,  "Accounting  for  Derivative  Instruments  and  Hedging
Activities",  effective  October 1, 2000.  Accordingly,  for the three-month and
nine-month  periods ended June 30, 2001,  all of the Company's  risk  management
derivative  instruments are recorded at fair value. Changes in the value of risk
management  derivative  instruments  designated as qualifying fair value hedging
relationships  are recognized in current  earnings along with the changes in the
value of the qualifying  hedged assets or  liabilities.  Changes in the value of
risk  management  derivative  instruments  designated  as  qualifying  cash flow
hedging relationships of forecasted loan sale transactions are recorded to other
comprehensive  income  ("OCI")  and  reclassified  to earnings  concurrent  with
settlement of the loan sale  transactions.  The accounting  policies relevant to
derivative instruments and hedging activities for each of the Company's key risk
management  areas  are  more  fully  discussed  in  note 5 to  the  consolidated
financial statements.

Market Environment

During  the last  nine  months,  the US  market  has  experienced  unprecedented
volatility  in the  interest  rate  environment.  In  response to the slowing US
economy,  the  Federal  Reserve  has  lowered  interest  rates on six  occasions
resulting in a decline in short-term interest rate of 275 basis points.

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

Continued uncertainties  surrounding future monetary policy and the state of the
US economy have  resulted in  significant  volatility  in interest  rate spreads
between  short  and  long  term  rates,  placing  considerable  pressure  on the
Company's hedge performance.  As more fully discussed in note 5 of the financial
statements,  HomeSide utilizes a combination of derivative instruments to create
a hedge portfolio that is intended to provide effective  protection of the value
of the Company's mortgage servicing rights from interest rate risk. The volatile
interest  rate   environment   discussed  above  has  negatively   impacted  the
effectiveness of these derivative instruments.


Following is a summary of risk  management  activities and results for the three
months and nine months ended June 30, 2001:


Risk Management of Loan Production Activities

The Company  maintains a risk management  program to protect and manage interest
rate risk and pricing risk associated with its mortgage  commitment pipeline and
mortgage  inventory.  In the normal  course of  business,  the  Company  extends
interest rate lock commitments ("IRLCs" or "commitments") to borrowers who apply
for loan funding and meet certain credit and underwriting criteria. IRLCs in the
mortgage  pipeline  expose the Company to interest  rate and pricing  risk. In a
rising rate environment,  the aggregate value of the Company's commitments tends
to decrease in value and,  generally,  at an  accelerating  rate. In a declining
rate  environment,  the value of the Company's  commitments tends to increase in
value.  However,  the rate of increase in the value tends to  decelerate  as the
likelihood of the borrower closing on the loan decreases if market rates decline
by a meaningful amount versus the borrower's committed rate. As part of its risk
management processes, the Company has devoted substantial resources and modeling
solutions to enable  management  to project the  expected  percent of IRLCs that


                                       23
<PAGE>

will  ultimately fund under  different  interest rate scenarios  (referred to as
"pull-through  rates"). The success of the Company's risk management  strategies
relies on proactive  analysis of historical  and projected  pull-through  rates.
However,  since borrower behavior cannot be perfectly  predicted and modeled, an
element of economic  ineffectiveness  can be expected in the Company's  pipeline
hedging relationships.

In the aggregate,  the Company's  strategy  involves the use of a combination of
mortgage  forward   delivery   commitments  and  mortgage  options  to  maintain
appropriate  risk management  coverage  related to IRLCs.  The Company  utilizes
mortgage forward delivery contracts to hedge a baseline portion of the Company's
pipeline composed of interest rate lock commitments that management believes are
probable of closing.  Additionally,  the  Company  utilizes  options on mortgage
securities  and certain other products to hedge an element of the pipeline which
is considered more uncertain of closing,  and for which  pull-through  rates are
likely to be volatile. During the three months and nine months ended June, 2001,
the Company's risk management  strategy was effective in the declining  interest
rate environment as the increase in the value of the Company's  commitments more
than offset the losses in the value of the related  risk  management  derivative
instruments.  During the three months and nine months ended June 30, 2001, a net
gain of approximately $5.2 million and $12.9 million,  respectively attributable
to  pipeline  hedging  results  was  recognized  to  earnings.  Pursuant  to the
requirements  of SFAS  133  (which  are  discussed  in  note 4 to the  Company's
consolidated  financial  statements)  interest rate lock commitments and related
risk  management  derivative  instruments  are accounted  for as  non-designated
derivatives with changes in their values recorded to current earnings.

Interest  rate  lock  commitments  that  are  ultimately   funded  (closed)  are
classified  as loans held for sale and are  included in the  Company's  mortgage
inventory.  Closed loans in the mortgage  inventory are also subject to interest
rate and pricing risk. The Company's risk management program involves the use of
mortgage  forward  delivery  contracts  to  hedge  100%  of its  agency-eligible
conforming  loans as forecasted  loan sales.  Pursuant to the terms of SFAS 133,
the Company accounts for the forward  delivery  contracts as cash flow hedges of
forecasted loan sales. The forward  contracts  achieve  effective offset against
the changes in the value of the loans in that the forward contracts  effectively
fix the future loan delivery price. At June 30, 2001,  gains on forward delivery
contracts of $8.4 million were  included in other  comprehensive  income  (OCI).
Pursuant to the  requirements  of SFAS 133, the unrealized  gains in OCI will be
recognized to earnings on the loan  settlement  dates,  as the  forecasted  loan
sales are consummated over the next 90 days.

Risk Management of Mortgage Servicing Rights (Restated)

Mortgage  servicing  rights  represent  the  capitalized  value of the estimated
future net servicing revenues associated with the Company's servicing portfolio.
See Note 4 to the Consolidated  Financial  Statements.  The Company  maintains a
risk  management  program  intended to protect  the value of mortgage  servicing
rights from changes in value due to changes in estimated loan prepayment speeds,
which are mainly influenced by changes in interest rates.

The value of mortgage  servicing  rights is  extremely  sensitive  to changes in
interest  rates  since  interest  rates are the  primary  driver  of actual  and
projected prepayment rates. As interest rates decline, prepayment rates increase
as a result of actual and expected  refinancing  activities of  borrowers.  As a
result,  the value of mortgage  servicing  rights decreases in value as interest
rates decline and,  generally,  at accelerating rates depending in large measure
on the note rates of the underlying  loans in relation to market interest rates.
The value of the  Company's  mortgage  servicing  rights is based on the present
value of expected  cash flows  received  over the life of the loan using  vendor
models  which  incorporate  prepayment  estimates to forecast  estimated  future
servicing revenues, servicing costs, ancillary revenues, escrow earnings, credit
losses and other expenses. See Note 4 to the Consolidated Financial Statements.

The Company's risk  management  program  involves the use of a portfolio of risk
management  derivative  instruments  which  increase in value as interest  rates
decline.  More  specifically,   management  uses  a  combination  of  derivative
instruments  designed to offset  changes in the value of the mortgage  servicing
rights in different interest rate scenarios. The Company also attempts to manage
basis risk, term sector risk, and liquidity risk by  diversifying  its portfolio
with an  array  of  derivative  instruments  that  are  approved  for use by the
Company's  ALCO.  Accordingly,  the hedge  portfolio is  generally  comprised of
mortgage products, swap products and treasury products that are structured along
various  points of the yield curve.  The Company  continues to review and expand
its risk management framework.  In view of the volatile market environment,  the
growth of the Company,  and the  complexities  inherent with risk  management of
mortgage   servicing  rights,  the  Company  has  made  and  continues  to  make
investments to enhance systems and control.

Since the inception of HomeSide in March of 1996,  the Company's  hedge strategy
has been effective in providing  effective offset to changes in the value of its
mortgage servicing rights.  However, as of the three months ended June 30, 2001,
the Company did not qualify for hedge accounting pursuant to the requirements of
SFAS 133 (see Note 2). As a result,  the Company  recognized to current earnings
($567.7)  million in (loss) on  derivatives  determined to no longer qualify for
hedge accounting and a $75.3 million  reduction in impairment  provision for the
mortgage  servicing  rights asset for the three months ended June 30, 2001.  For
the nine months ended June 30, 2001, the Company  recognized to current earnings
$66.9 million in gain on  derivatives  determined to no longer qualify for hedge
accounting and a $827.1 million impairment  provision for the mortgage servicing
rights asset.


                                       24
<PAGE>



Risk Management of Corporate Funding

As part of its corporate  funding and balance sheet management  strategies,  the
Company  maintains a desired level of its total  borrowings  through  short-term
funding sources.  To meet the Company's  financing needs,  short-term funding is
provided  through the  Company's  commercial  paper  program and its  short-term
facility with the Parent.  Additionally,  the Company can alter its weighting in
fixed-rate funding by converting  medium-term notes to floating rate. During the
three-month period ended June 30, 2001, the Company was party to $750 million in
interest  rate  swaps  which  were  effective  in  converting  $750  million  of
medium-term  notes  to  LIBOR-based  funding.  As  discussed  in  note  5 to the
financial  statements,  the interest rate swaps were accounted for as fair value
hedges of the designated medium-term notes.


Liquidity and Capital Resources

The Company's  principal  financing needs are the financing of loan  origination
activities and the investment in mortgage servicing rights. To meet these needs,
the Company  currently  utilizes  funding from its commercial  paper program,  a
credit  facility with the National,  medium-term  notes,  money market notes, an
independent  syndicate  of  banks,  repurchase  agreements,  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 quarter ended June 30, 2001 was $20.4
million.  Net cash used in  operations  for the quarter  ended June 30, 2000 was
$427.0  million.  Net cash provided by operating  activities  for the nine-month
periods  ended June 30,  2001 and 2000 was $313.0  million  and $291.1  million,
respectively.  Cash provided from servicing fee income, loan sales and principal
repayments was offset by cash used for the  origination and purchase of mortgage
loans  held  for  sale and to pay  corporate  expenses.  Cash  flows  from  loan
originations  are dependent  upon current  economic  conditions and the level of
long-term interest rates. Decreases in long-term interest rates generally result
in higher loan  refinancing  activity,  which  results in higher cash demands to
meet loan production levels.

Investing

Net cash used in investing  activities  for the quarters ended June 30, 2001 and
2000 were $315.6  million  and $123.5  million,  respectively.  Net cash used in
investing  activities  for the  nine-month  periods ended June 30, 2001 and 2000
were $851.2  million and $924.7  million,  respectively.  Cash used in investing
activities was primarily for the purchase of mortgage  servicing rights and risk
management  contracts.  Cash was  provided  by  proceeds  from  risk  management
contracts  and  early  pool  buyout  reimbursements.  Future  uses of  cash  for
investing  activities will be dependent on the mortgage  origination  market and
HomeSide's hedging needs. HomeSide is not able to estimate the timing and amount
of cash uses for future acquisitions of other mortgage banking entities, if such
acquisitions were to occur.

Financing

Net cash provided by financing  activities  for the quarters ended June 30, 2001
and 2000 was $386.1 million and $425.0 million,  respectively. Net cash provided
by financing  activities for the nine-month periods ended June 30, 2001 and 2000
were  $708.8  million and $609.5  million,  respectively.  Cash was  provided by
borrowings from the National and the issuance of medium-term  notes,  short-term
notes, and commercial  paper. Cash was used for repayment of borrowings from the
National and commercial paper, payment of debt issue costs, payment of dividends
to the Parent, and repayment of medium-term notes.

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  established  funding  sources 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.



                                       25
<PAGE>



Quantitative and Qualitative Market Risk

There have been no material  changes in the Company's market risk from September
30, 2000. For  information  regarding the Company's  market risk,  refer to Form
10-K for the fiscal year ended  September  30,  2000 of HomeSide  International,
Inc.  Additionally,  the results of HomeSide's risk management  programs and the
associated accounting for derivative instruments and hedging activities pursuant
to SFAS 133, as amended,  is more fully described in Note 5 to the  Consolidated
Financial Statements.



                           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) No documents are filed as a part of this Report

(b) Reports on form 8-K

  HomeSide filed no reports on Form 8-K during the quarter ended June 30, 2001.







                                       26
<PAGE>




                                   SIGNATURES

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

                            HomeSide International, Inc.
                            ----------------------------
                            (Registrant)

Date: December 6, 2001      By:  /s/ Joseph J. Whiteside
                                     ----------------------------
                                      Joseph J. Whiteside
                            Chief Executive Officer
                            (Principal Executive Officer)


Date: December 6, 2001      By:  /s/ Susan Lester
                                     ---------------------------
                                     Susan Lester
                            Executive Vice President and Chief Financial Officer
                            (Principal Financial and Accounting Officer)






                                       27