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

                                    FORM 10-Q

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

                  For the quarterly period ended March 31, 1999

                                       OR

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

                           Commission File No. 1-12655

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

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

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

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



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



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

           Class                                     Outstanding at May 14, 1999

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













                              FINANCIAL INFORMATION

ITEM 1.  Financial Statements
<TABLE>
<CAPTION>


                          HOMESIDE INTERNATIONAL, INC.
                           CONSOLIDATED BALANCE SHEETS

                    (Dollars in Thousands, Except Share Data)


                                                                                                   (Unaudited)

                                                                                       March 31, 1999        September 30, 1998
                                                                                       -------------------   -----------------------
<S>                                                                                    <C>                   <C>
    ASSETS

    Cash and cash equivalents                                                                     $56,089                   $35,008
    Mortgage loans held for sale, net                                                           1,849,792                 2,048,989
    Mortgage servicing rights, net                                                              2,824,672                 1,779,180
    Early pool buyout advances                                                                    453,327                   759,579
    Accounts receivable, net                                                                      227,800                   272,005
    Premises and equipment, net                                                                    54,578                    45,657
    Goodwill, net                                                                                 678,983                   693,543
    Other assets                                                                                   89,528                   117,596
                                                                                       -------------------   -----------------------
    Total Assets                                                                              $ 6,234,769               $ 5,751,557
                                                                                       ===================   =======================
                                                                                       

    LIABILITIES AND STOCKHOLDER'S EQUITY

    Notes payable                                                                             $ 3,033,200               $ 2,749,000
    Accounts payable and accrued liabilities                                                      414,310                   241,302
                                                                                                                            
    Deferred income taxes                                                                         187,540                   160,520
    Long-term debt                                                                              1,334,670                 1,337,783
                                                                                       -------------------   -----------------------
    Total Liabilities                                                                           4,969,720                 4,488,605
                                                                                       -------------------   -----------------------

    Stockholder's Equity:
    Common stock:
         Common stock, $.01 par value, 100 shares authorized and 1 share issued and
             Outstanding                                                                              -                       -
         Class C non-voting common stock, $1.00 par value, 195,000 shares
             authorized, and 0 shares issued and outstanding                                          -                       -
    Additional paid-in capital                                                                  1,231,302                 1,227,846
                                                                                                                          
    Retained earnings                                                                              33,747                    35,106
                                                                                       -------------------   -----------------------
    Total Stockholder's Equity                                                                  1,265,049                 1,262,952
                                                                                       -------------------   -----------------------
    Total Liabilities and Stockholder's Equity                                                $ 6,234,769               $ 5,751,557
                                                                                       ===================   =======================


</TABLE>





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


<PAGE>


<TABLE>
<CAPTION>

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

                             (Dollars in Thousands)

                                                                                  For the Three         For the Period
                                                                                  Months Ended         from February 11,
                                                                                 March 31, 1999             1998 to
                                                                                                        March 31, 1998
                                                                                ------------------    --------------------

<S>                                                                             <C>                   <C>
           REVENUES:

           Mortgage servicing fees                                                       $144,450                 $64,267
           Amortization of mortgage servicing rights                                      (96,830)                 (37,366)
                                                                                ------------------    --------------------
               Net servicing revenue                                                       47,620                  26,901

           Interest income                                                                 50,423                  18,290
           Interest expense                                                               (35,198)                 (15,453)
                                                                                ------------------     --------------------
               Net interest revenue                                                        15,225                   2,837

           Net mortgage origination revenue                                                41,639                  14,269
           Other income                                                                       727                     620
                                                                                ------------------    --------------------
               Total Revenues                                                             105,211                  44,627

           EXPENSES:

           Salaries and employee benefits                                                  33,814                  14,630
           Occupancy and equipment                                                          6,697                   2,394
           Servicing losses on investor-owned loans
              and foreclosure-related expenses                                              8,859                   1,823
           Goodwill amortization                                                            8,959                  4,941
           Other expenses                                                                  15,939                  8,195
                                                                                ------------------     --------------------
               Total Expenses                                                              74,268                  31,983

           Income before income taxes                                                      30,943                  12,644
           Income tax expense                                                              15,561                   6,858
                                                                                ------------------    --------------------
           Net income                                                                     $15,382                  $5,786
                                                                                ==================    ====================

</TABLE>







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


<TABLE>
<CAPTION>



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

                             (Dollars in Thousands)

                                                                                                                    Predecessor
                                                                    For the Six           For the Period          For the Period
                                                                    Months Ended         from February 11,       From September 1,
                                                                   March 31, 1999             1998 to            1997 to February
                                                                                          March 31, 1998             10, 1998
                                                                  -----------------     --------------------    --------------------

<S>                                                               <C>                   <C>                     <C>
REVENUES:

Mortgage servicing fees                                                   $278,627                  $64,267                $194,690
Amortization of mortgage servicing rights                                 (180,488)                  (37,366)              (107,458)
                                                                  -----------------     --------------------    --------------------
    Net servicing revenue                                                   98,139                   26,901                  87,232

Interest income                                                             96,598                   18,290                  51,166
Interest expense                                                           (67,532)                  (15,453)               (51,074)
                                                                  -----------------     --------------------    --------------------
    Net interest revenue                                                    29,066                    2,837                      92

Net mortgage origination revenue                                            79,925                   14,269                  46,695
Other income                                                                 2,513                      620                     635
                                                                  -----------------     --------------------    --------------------
    Total Revenues                                                         209,643                   44,627                 134,654

EXPENSES:

Salaries and employee benefits                                              68,328                   14,630                  36,137
Occupancy and equipment                                                     13,144                    2,394                   7,820
Servicing losses on investor-owned loans                                                                         
   and foreclosure-related expenses                                         18,643                    1,823                  11,465
Goodwill amortization                                                       17,878                    4,941                     283
Other expenses                                                              32,397                    8,195                  19,085
                                                                  -----------------     --------------------    --------------------
    Total Expenses                                                         150,390                   31,983                  74,790

Income before income taxes                                                  59,253                   12,644                  59,864
Income tax expense                                                          30,080                    6,858                  23,347
                                                                  -----------------     --------------------    --------------------
Net income                                                                 $29,173                   $5,786                 $36,517
                                                                  =================     ====================    ====================

</TABLE>






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


<TABLE>
<CAPTION>



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

                             (Dollars in Thousands)
                                                                                 For the Three       For the Period from
                                                                                  Months Ended        February 11, 1998
                                                                                 March 31, 1999       to March 31, 1998
                                                                               -------------------   ---------------------
<S>                                                                            <C>                   <C>
           CASH FLOWS  PROVIDED BY (USED IN) OPERATING ACTIVITIES:

           Net income                                                                     $15,382                  $5,786
                                                                                                              
           Adjustments to reconcile net income to net cash provided by 
                 operating activities:
             Amortization of mortgage servicing rights                                     96,830                  37,366
             Depreciation and amortization                                                  9,637                   5,345
             Servicing losses on investor-owned loans                                       2,962                   1,193
             Change in deferred income tax liability                                       11,726                   6,859
             Origination, purchase and sale of loans held for sale, net of                
                repayments                                                                367,189                (358,895)
             Change in accounts receivable                                                 32,897                 (56,462)
             Change in other assets and accounts payable and accrued  
                liabilities                                                                61,006                 123,728
                                                                               -------------------   ---------------------
           Net cash provided by (used in) operating activities                            597,629                (235,080)

           CASH FLOWS USED IN INVESTING ACTIVITIES:

           Purchase of premises and equipment, net                                         (5,855)                 (3,549)
           Acquisition of mortgage servicing rights                                      (418,578)               (162,259)
           Net (purchase of) proceeds from risk management contracts                     (253,528)                 14,185
           Early pool buyout reimbursements (advances)                                     33,700                 (74,910)
                                                                               -------------------   ---------------------
           Net cash used in investing activities                                        (644,261)                (226,533)

           CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:

           Net borrowings from banks                                                       41,000                 383,791
           Repayments of commercial paper, net                                            (30,167)                     -
           Issuance of notes payable                                                           -                   60,000
           Payment of debt issue costs                                                         -                     (208)
           Repayment of long-term debt                                                       (120)                    (38)
                                                                               -------------------   ---------------------
           Net cash provided by financing activities                                       10,713                 443,545

           Net decrease in cash and cash equivalents                                      (35,919)                (18,068) 
           Cash and cash equivalents at beginning of period                                92,008                  32,113 
                                                                               -------------------   ---------------------
           Cash and cash equivalents at end of period                                     $56,089                 $14,045
                                                                               ===================   =====================

           Supplemental disclosure of cash flow information:
           Interest paid                                                                 $ 67,029                $ 13,603
           Income taxes paid                                                              $ 3,833                     -


</TABLE>






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






<TABLE>
<CAPTION>




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

                             (Dollars in Thousands)
                                                                                                                   Predecessor
                                                                    For the Six        For the Period from     For the Period from
                                                                   Months Ended         February 11, 1998       September 1, 1997
                                                                  March 31, 1999        to March 31, 1998      to February 10, 1998
                                                                 ------------------    ---------------------   ---------------------
<S>                                                              <C>                   <C>                     <C>
CASH FLOWS  PROVIDED BY (USED IN) OPERATING ACTIVITIES:

Net income                                                                      
                                                                           $29,173                   $5,786                 $36,517
Adjustments  to  reconcile   net  income  to  net  cash  
      provided by operating activities:
  Amortization of mortgage servicing rights                                180,488                   37,366                 107,458
  Depreciation and amortization                                             19,174                    5,345                   5,037
  Servicing losses on investor-owned loans                                   6,635                    1,193                   5,781
  Change in deferred income tax liability                                   27,020                    6,859                  20,758
  Origination, purchase and sale of loans held for sale, net of
    repayments                                                             199,197                 (358,895)               (211,035)
  Change in accounts receivable                                             37,339                  (56,462)                (48,484)
  Change in other assets and accounts payable and accrued                                          
    ilities                                                                118,922                  123,728                 (73,723)
                                                                 ------------------    ---------------------------------------------
Net cash provided by (used in) operating activities                        617,948                 (235,080)               (157,691)

CASH FLOWS USED IN BY INVESTING ACTIVITIES:

Purchase of premises and equipment, net                                    (12,313)                  (3,549)                (12,037)
Acquisition of mortgage servicing rights                                  (672,812)                (162,259)               (261,387)
Net (purchase of) proceeds from risk management contracts                 (474,460)                  14,185                 218,306
Early pool buyout reimbursements (advances)                                306,252                  (74,910)                 (5,692)
                                                                 ------------------    ---------------------   ---------------------
Net cash used in investing activities                                     (853,333)                (226,533)                (60,810)

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:

Net (repayments to) borrowings from banks                                 (990,899)                 383,791                 206,627
Issuance of commercial paper                                             1,278,200                      -                       -
Issuance of notes payable                                                     -                      60,000                  45,000
Payment of debt issue costs                                                   -                        (208)                   (886)
Repayment of long-term debt                                                   (302)                     (38)                   (358)
Dividends paid to the Parent                                               (30,533)                    -                        200
                                                                 ------------------    ---------------------   ---------------------
Net cash provided by financing activities                                  256,466                  443,545                 250,583

Net increase (decrease) in cash and cash equivalents                        21,081                  (18,068)                 32,082
Cash and cash equivalents at beginning of period                            35,008                   32,113                      31
                                                                 ------------------    ---------------------   ---------------------
Cash and cash equivalents at end of period                                  56,089                  $14,045                 $32,113
                                                                 ==================    =====================   =====================

Supplemental disclosure of cash flow information:
Interest paid                                                            $ 105,165                 $ 13,603                 $52,922
Income taxes paid                                                         $ 18,786                 $    -                   $   821

</TABLE>






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








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

1.  BASIS OF PRESENTATION

     The accompanying  consolidated  financial  statements have been prepared in
accordance with generally accepted  accounting  principles for interim financial
information and with the  instructions to Form 10-Q and Rule 10-01 of Regulation
S-X.  Accordingly,  they do not include  all of the  information  and  footnotes
required by generally  accepted  accounting  principles  for complete  financial
statements. In the opinion of management,  all adjustments (consisting of normal
recurring  adjustments)  considered  necessary for a fair presentation have been
included.

     On February  10, 1998,  National  Australia  Bank,  Ltd.  (the  "National")
acquired all outstanding  shares of the common stock of HomeSide  International,
Inc.  ("HomeSide" or the  "Company")  and HomeSide  adopted a fiscal year end of
September  30 to  conform  to the  fiscal  year  of the  National.  Accordingly,
comparative  financial statements for the same period in the prior year have not
been presented.  Instead, a comparison of the period of the prior year that most
closely  corresponds  to the present period is presented.  HomeSide's  operating
results are not directly comparable to its historical  operating results due, in
part, to different balance sheet valuations (estimated fair value as compared to
historical cost). In addition, because HomeSide's operating results are produced
and  managed on a quarterly  basis,  it is not  practicable  to furnish a period
prior to February 11, 1998 that  corresponds to any period other than the period
reported according to the predecessor's prior fiscal year periods.

     Operating  results for the three and six months ended March 31,  1999,  the
period from February 11, 1998 to March 31, 1998, and the predecessor period from
September 1, 1997 to February  10, 1998 are not  necessarily  indicative  of the
results that may be expected for the fiscal  period  ending  September 30, 1999.
For further  information,  refer to the  consolidated  financial  statements and
footnotes  thereto  included in the Form 10-K for the period from  February  11,
1998 to September 30, 1998 of HomeSide International, Inc.

2.  ORGANIZATION

     On December 11, 1995, HomeSide was formed by an investor group,  consisting
of Thomas H. Lee  Company  and  Madison  Dearborn  Partners  (collectively,  the
"Investors"),  and signed a definitive  stock purchase  agreement with The First
National  Bank of Boston  ("BankBoston")  for the purpose of  acquiring  certain
assets and  liabilities  of the mortgage  banking  business owned by BankBoston.
BankBoston received cash and an ownership interest in HomeSide.  The transaction
closed on March 15, 1996 and HomeSide began operations on March 16, 1996.

     On May 31,  1996,  Barnett  Banks,  Inc.  ("Barnett")  sold  certain of its
mortgage  banking  operations,   primarily  its  servicing  portfolio,  mortgage
servicing  operations and proprietary  mortgage  banking  software  systems,  to
HomeSide . Barnett  received  cash and an  ownership  interest in HomeSide . The
accompanying   financial  statements  reflect  the  effects  of  both  of  these
acquisitions.  From May 31, 1996 until the 1997 public offering of common stock,
the  Investors,  BankBoston  and Barnett each owned  approximately  one-third of
HomeSide . Following the public offering, the Investors,  BankBoston and Barnett
owned in the aggregate approximately 79% of the outstanding common stock.

     On January 9, 1998, NationsBank  Corporation,  now BankAmerica Corporation,
acquired all the outstanding common stock of Barnett Banks, Inc.

     On February 10, 1998, the National  acquired all outstanding  shares of the
common stock of HomeSide. As consideration,  the National paid $27.825 per share
for all of the  outstanding  common  stock and $17.7  million cash to retire all
outstanding  stock  options.  The total purchase  price was  approximately  $1.2
billion.  The National paid for the purchase with borrowed and available  funds.
The  transaction  was accounted for as a purchase.  As a result,  all assets and
liabilities  were  recorded at their fair value on February  11,  1998,  and the
purchase  price in excess of the fair  value of net  assets  acquired  of $713.6
million was recorded as goodwill. Following the transaction described above, the
National now owns 100% of the Company's  common stock and the Company has become
an indirect  wholly-owned  subsidiary of the  National.  HomeSide also adopted a
fiscal year end of September 30 to conform to the fiscal year of the National.

3.       ACQUISITIONS

      On  November  23,  1998,   HomeSide  agreed  to  purchase  or  sub-service
approximately  $5 billion in mortgage  servicing from People's Bank, the largest
mortgage lender in Connecticut.  People's Bank also became a Preferred  Partner,
committing to sell a significant  portion of the  residential  mortgage loans it
originates to HomeSide for five years.

      On March 4, 1999, HomeSide agreed to purchase or sub-service the servicing
portfolio  of  First  Chicago  NBD  Mortgage  Company  ("First  Chicago").  This
transaction  represents an expansion of HomeSide's  strategic alliance with Banc
One Mortgage  Corporation and an increase in HomeSide's  servicing  portfolio of
approximately $18 billion. In addition,  First Chicago has committed to sell the
servicing rights associated with its residential mortgage production to HomeSide
on a flow basis.

4.  MORTGAGE SERVICING RIGHTS

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

Balance, September 30, 1998                $1,779,180
Additions                                     672,812
Sales of servicing                               -
Deferred hedge loss                           553,168
Amortization                                 (180,488)
                                       -----------------
Balance, March 31, 1999                    $2,824,672
                                       =================

5.       NOTES PAYABLE

Notes payable consist of the following (in thousands):
<TABLE>
<CAPTION>
                                                                               Weighted Average Interest Rate
                                                    Total Outstanding       At Period End       During the Period

<S>                                               <C>                       <C>                  <C>  
Commercial paper                                       $ 1,278,200              4.98%                 5.05%
National Australia Bank unsecured facility               1,755,000              4.97%                 5.12%
                                                  ----------------------
  Total, March 31, 1999                                $ 3,033,200
                                                  ======================
Bank line of credit                                    $   995,000               5.88%                5.96%
National Australia Bank unsecured facility               1,754,000               5.66%                5.67%
                                                  ----------------------
  Total, September 30, 1998                            $ 2,749,000
                                                  ======================
</TABLE>


     On October 21, 1998,  HomeSide  Lending,  Inc.  established  a $1.5 billion
commercial paper program. The program is supported by the Company's bank line of
credit and outstanding  commercial paper reduces available  borrowings under the
bank line of credit.  At March 31, 1999,  a total of $1.3 billion of  commercial
paper was  outstanding.  The weighted average interest rates on commercial paper
outstanding  during the three and six month  periods  ended  March 31, 1999 were
5.05% and 5.18%, respectively.

     On June 23,  1998,  HomeSide  entered  into an  agreement  for an unsecured
revolving  credit  facility  with the  National.  HomeSide can borrow up to $2.1
billion,  subject to limits imposed by regulatory  authorities.  As of March 31,
1999,  regulations  limited the National's ability to lend funds to HomeSide,  a
non-bank  affiliate,  to $2.0  billion.  The  interest  rate is  charged  at the
corresponding  LIBOR rate. At March 31, 1999, the amount  outstanding under this
credit  facility  totaled $1.8 billion.  The weighted  average  interest rate on
outstanding borrowings under this facility during the three and six months ended
March 31, 1999 were 5.12% and 5.29%, respectively.

     HomeSide  borrows funds on a demand basis from an independent  syndicate of
banks under a $2.0 billion credit  facility  which,  at the request of HomeSide,
may be increased to $3.0 billion.  The line of credit  includes both a warehouse
credit facility,  which is limited to 98% of the fair value of eligible mortgage
loans held for sale, and a servicing-related facility, which is capped at $760.0
million.  Borrowings  under the bank line of credit  bear  interest at rates per
annum,  based on, at  HomeSide's  option (A) the  highest of (i) the lead bank's
prime rate,  (ii) the secondary  market rate of certificates of deposit plus 100
basis  points and (iii) the federal  funds rate in effect from time to time plus
0.5% or (B) various rates based on federal fund rates. On February 14, 2000, the
line of credit will  terminate.  The credit  agreement  contains  covenants that
impose  limitations  and  restrictions  on HomeSide,  including  requirements to
maintain certain net worth and ratio requirements.  Under certain  circumstances
set  forth in the  credit  agreement,  borrowings  under  the  agreement  become
collateralized  by  HomeSide's  assets.  HomeSide  is  in  compliance  with  all
requirements  included in the credit  agreement.  At March 31, 1999, the primary
purpose of the credit facility was to provide  liquidity  back-up for HomeSide's
$1.5 billion commercial paper program and there was no balance outstanding under
the credit line. At September 30, 1998, the amount  outstanding under the credit
line, all of which was under the warehouse credit facility, was $1.0 billion.




6.  LONG-TERM DEBT

11.25 % Notes

      On May 14,  1996,  HomeSide  issued  $200.0  million of 11.25%  notes (the
"Parent Notes")  maturing on May 15, 2003, and paying  interest  semiannually in
arrears on May 15 and November 15 of each year.  The Parent Notes are redeemable
at the option of HomeSide,  in whole or in part, at any time on or after May 15,
2001, at certain fixed redemption  prices. The indenture contains covenants that
impose limitations and restrictions,  including requirements to maintain certain
net worth and ratio requirements. In addition, the Parent Notes are secured by a
second priority pledge of the common stock of HomeSide  Lending.  HomeSide is in
compliance with all net worth and ratio  requirements  included in the indenture
relating to the Parent  Notes.  HomeSide used a portion of the proceeds from its
February 5, 1997 offering of common stock to pre-pay $70.0 million of the Parent
Notes at a premium of $7.9 million. The amount outstanding at March 31, 1999 was
$130.0 million. The balance of the Parent Notes at March 31, 1999, including the
fair value  adjustment  resulting from the merger with the National,  was $149.4
million.

Medium-term notes

        As of March 31, 1999,  outstanding  medium-term notes issued by HomeSide
Lending under a $1.5 billion shelf  registration  statement  were as follows (in
thousands):

Issue Date            Outstanding Balance      Coupon Rate   Maturity Date

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

      As of March 31,  1999,  $850.0  million  of the  outstanding,  fixed  rate
medium-term  notes  had  been  effectively   converted  by  interest  rate  swap
agreements to  floating-rate  notes.  The weighted  average  borrowing  rates on
medium-term borrowings issued for the three and six months ended March 31, 1999,
including the effect of the interest rate swap agreements, were 5.80% and 5.86%,
respectively.  Net proceeds from the issuances were primarily used to reduce the
amounts  outstanding under the bank credit agreement and to fund a $16.6 billion
portfolio  acquisition  from Banc One. The balance of the  medium-term  notes at
March 31, 1999,  including the fair value  adjustment  resulting from the merger
with the National, was $1.2 billion.

Mortgage note payable

          In connection with the acquisition of BancBoston Mortgage Corporation,
HomeSide  assumed a mortgage note payable that is due in 2017 and bears interest
at a stated  rate of  9.5%.  HomeSide's  main  office  building  is  pledged  as
collateral for the mortgage note payable. The balance of the mortgage payable at
March 31, 1999,  including the fair value adjustments  resulting from the merger
with the National, was $24.0 million.

7.  EARLY POOL BUYOUT ADVANCES AND SALES

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

        In December 1998,  HomeSide Lending entered into a Pooling and Servicing
Agreement with Bank One Trust Company,  N.A., as Trustee,  and HomeSide Funding,
as Transferor,  pursuant to which  approximately $92 million and $283 million of
delinquent mortgage loans were sold to HomeSide Funding during the three and six
month periods  ending March 31, 1999,  respectively.  Subsequently,  these loans
were sold to the HomeSide Mortgage Loan Buyout Trust 1998-A.


8.       NEW ACCOUNTING STANDARDS

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

        In  October  1998,  the  Financial  Accounting  Standards  Board  issued
Statement  of  Financial   Accounting   Standards  No.  134,   "Accounting   for
Mortgage-Backed  Securities Retained after Securitization of Mortgage Loans Held
for Sale by a  Mortgage  Banking  Enterprise."  This  statement  further  amends
Statement No. 65 to require that after the securitization of mortgage loans held
for sale,  an  entity  engaged  in  mortgage  banking  activities  classify  the
resulting  mortgage-backed  securities or other retained  interests based on its
ability  and  intent  to sell or hold  those  investments.  This  statement  was
effective  for the first  fiscal  quarter  beginning  after  December  15, 1998.
Management has determined that the impact of this statement on the  presentation
of the financial statements of HomeSide is immaterial.

9.       DIVIDENDS

     On October 1, 1998 the Company  paid a dividend to the Parent in the amount
of $30.5 million.



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

General

      HomeSide  International,  Inc. (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.  HomeSide's strategy emphasizes variable cost mortgage origination,  low
cost servicing,  and effective risk  management.  Headquartered in Jacksonville,
Florida,  HomeSide  Lending  ranks  as the 9th  largest  originator  and the 6th
largest  servicer in the United  States at  September  30,  1998,  based on data
published by Inside Mortgage Finance .

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

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

         As a result of the merger with the National,  HomeSide adopted a fiscal
year  end of  September  30 to  conform  to the  fiscal  year  of the  National.
Accordingly,  comparative  financial statements for the same period in the prior
year have not been presented.  Instead,  a comparison of the period of the prior
year  that  most  closely  corresponds  to  the  present  period  is  presented.
HomeSide's  operating  results are not  directly  comparable  to its  historical
operating results due, in part, to different balance sheet valuations (estimated
fair value as compared to  historical  cost).  In addition,  because  HomeSide's
operating  results are  produced  and managed on a  quarterly  basis,  it is not
practicable  to furnish a period prior to February 11, 1998 that  corresponds to
any period other than the periods reported according to the predecessor's  prior
fiscal year periods. Therefore, the prior period from February 11, 1998 to March
31, 1998 and the predecessor  period from September 1, 1997 to December 10, 1998
have been presented in accordance with Regulation 15d-10(e)(4).

        Operating  results for the three and six months ended March 31, 1999 and
the  period  from  February  11,  1998 to March  31,  1998  are not  necessarily
indicative  of the  results  that may be  expected  for the fiscal  year  ending
September 30, 1999. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Form 10-K for the fiscal period
from February 11, 1998 to September 30, 1998 of HomeSide International, Inc.

  Forward-Looking Statements

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

   Loan Production Activities

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

      The  following   information  regarding  loan  production  activities  for
HomeSide is  presented to aid in  understanding  the results of  operations  and
financial  condition  of HomeSide  for the three and six months  ended March 31,
1999, the period from February 11, 1998 to March 31, 1998,  and the  predecessor
period from September 1, 1997 to February 10, 1998 (in millions):

<TABLE>
<CAPTION>
                                                                                                                 Predecessor
                          For the Three       For the Period         For the Six        For the Period         For the Period
                           Months Ended      From February 11,       Months Ended      From February 11,      From September 1,
                          March 31, 1999     1998 to March 31,      March 31, 1999     1998 to March 31,      1997 to February
                                                   1998                                      1998                 10, 1998
                         -----------------  --------------------   -----------------  --------------------   --------------------
<S>                      <C>                 <C>                   <C>                <C>                    <C>    
Correspondent                     $ 5,296                $2,325            $ 10,594                $2,325                $ 6,280
Co-issue                            1,043                 1,488               1,915                 1,488                  2,907
Broker                              1,160                   372               2,250                   372                    609
                         -----------------  --------------------   -----------------  --------------------   --------------------
  Total wholesale                   7,499                 4,185              14,759                 4,185                  9,796
Direct                                360                    97                 683                    97                    193
  Total production                  7,859                 4,282              15,442                 4,282                  9,989
Bulk acquisitions                  22,037                     2              29,083                     2                  1,465
                         -----------------  --------------------   -----------------  --------------------   --------------------
  Total production and
    Acquisitions                  $29,896                $4,284             $44,525                $4,284                $11,454
                         =================  ====================   =================  ====================   ====================
</TABLE>

      Total loan production,  excluding bulk acquisitions,  was $7.9 billion for
the three  months  ended March 31, 1999  compared to $4.3 billion for the period
from  February  11,  1998 to March 31,  1998,  a 8%  annualized  decrease.  Loan
production  was $15.4 billion for the six months ended March 31, 1999,  compared
to $10.0 billion for the  predecessor  period from September 1, 1997 to February
10, 1998 and $4.3 billion for the period from  February 11, 1998  combined  with
March 31, 1998. On an annualized  basis,  loan production  increased 26% for the
six months ended March 31, 1999 from the  predecessor  period from  September 1,
1997 to February  10, 1998 and the period  from  February  11, 1998 to March 31,
1998 combined. For the six months ended March 31, 1999, HomeSide's correspondent
lending and broker channels were the primary  contributors to production volume.
The  correspondent  lending channel volume  increased 14% on an annualized basis
for the three months ended March 31, 1998  compared to the period from  February
11, 1998 to March 31, 1998.  Correspondent  lending  volume  increased 44% on an
annualized  basis for the six  months  ended  March  31,  1999  compared  to the
predecessor  period from  September  1, 1997 to February 10, 1998 and the period
from February 11, 1998 to March 31, 1998 combined.  A primary contributor to the
increase was the addition of Banc One and People's Bank as Preferred Partners on
June 5, 1998 and November 23, 1998, respectively.  As a Preferred Partners, Banc
One and  People's  Bank  will  sell a  significant  portion  of the  residential
mortgage loans they originate to HomeSide for five years.
         On  May  29,  1998,   HomeSide  also   purchased   the   operations  of
NationsBank's  subsidiary Loan America, a national broker network. This purchase
is  contributing  to HomeSide's  expansion of its broker  network,  a production
channel that is key to HomeSide's variable cost origination strategy. The broker
channel volume  increased 56% on an annualized  basis for the three months ended
March 31, 1999  compared to the period from February 11, 1998 to March 31, 1998.
The broker  channel  increased  168% on an  annualized  basis for the six months
ended March 31, 1999 compared to the  predecessor  period from September 1, 1997
to February  10, 1998 and the period  from  February  11, 1998 to March 31, 1998
combined.

      The interest rate environment has  significantly  affected the size of the
mortgage origination market. When interest rates decline,  increasing numbers of
mortgagees  refinance their loans. As a result, the mortgage  origination market
grows.  During  this  period of high  refinances,  HomeSide  has strived to keep
production at a level which is sustainable should the market size return to 1997
and 1996 volumes.  As an alternative,  HomeSide has emphasized its  acquisitions
strategy to maintain  and  increase  the  servicing  portfolio  size during this
period of relatively high portfolio runoff.

      As part of this acquisition strategy, HomeSide completed bulk acquisitions
totaling  $22.0 billion and $29.1 billion  during the three and six months ended
March 31, 1999, respectively. Bulk acquisitions for the period from February 11,
1998 to March 31,  1998 were  $2.0  million.  For the  predecessor  period  from
September 1, 1997 to February 10, 1998 and the period from  February 10, 1998 to
March 31, 1998 combined,  bulk acquisitions  were $1.5 billion.  The increase in
purchases  is a  continuation  of  HomeSide's  targeted  approach  to  grow  the
servicing  portfolio.  Included in these bulk  acquisitions is the March 4, 1999
purchase of First Chicago NBD Mortgage  Company's  ("First  Chicago")  servicing
portfolio.  This bulk  acquisition,  which represents an expansion of HomeSide's
strategic alliance with Banc One, increased  HomeSide's  servicing  portfolio by
approximately $18 billion. In addition,  First Chicago has committed to sell the
servicing  rights  associated  with its  residential  mortgage  originations  to
HomeSide on a flow basis.  Also included in bulk  acquisitions are $5 billion in
mortgage   loans   purchased  from  People's  Bank  on  November  23,  1998  and
approximately  $2.8 billion in mortgage  loans  purchased on March 31, 1999 from
another significant  non-bank originator of mortgages in the United States. This
non-bank  originator  has  also  agreed  to  sell  $7  billion  of its  mortgage
production to HomeSide each year.  People's Bank, the largest mortgage lender in
Connecticut,  also became a  Preferred  Partner  and has  committed  to sell its
residential mortgage originations to HomeSide for five years.

         HomeSide  continues to examine a number of ways to  diversify  and grow
revenue sources from its existing and new customer base. As part of this effort,
HomeSide has formed an alliance with a subprime  mortgage  lender,  which allows
HomeSide  to  offer  additional  mortgage-related  products  to  the  production
network.

   Servicing Portfolio

      Management  believes that HomeSide is one of the most  efficient  mortgage
servicers in the industry based on its servicing cost per loan and the number of
loans  serviced per employee.  The servicing  operation  makes  extensive use of
state-of-the-art technology, process re-engineering and expense management. With
a portfolio size of $140 billion,  HomeSide  services the loans of approximately
1.6  million  homeowners  from  across the United  States  and is  committed  to
protecting the value of this important asset by a sophisticated  risk management
strategy.  HomeSide anticipates its low cost of servicing loans will continue to
maximize the bottom-line impact of its growing servicing  portfolio.  HomeSide's
focus on efficient and low cost  processes is pursued  through the selective use
of  automation,  strategic  outsourcing  of  selected  servicing  functions  and
effective control of delinquencies and foreclosures.

      The  following  information  on the dollar  amounts of loans  serviced  is
presented  to aid in  understanding  the  results of  operations  and  financial
condition of HomeSide  for the three and six months  ended March 31,  1999,  the
period from February 11, 1998 to March 31, 1998, and the predecessor period from
September 1, 1997 to February 10, 1998 (in millions):
<TABLE>
<CAPTION>

                                                                                                                 Predecessor
                            For the Three       For the Period        For the Six        For the Period        For the Period
                             Months Ended      From February 11,      Months Ended      From February 11,     From September 1,
                            March 31, 1999     1998 to March 31,     March 31, 1999     1998 to March 31,     1997 to February
                                                     1998                                     1998                10, 1998
                           -----------------  --------------------  -----------------  --------------------  --------------------
<S>                        <C>                <C>                   <C>                <C>                   <C>
Balance at beginning of
  Period                          $ 118,797              $ 99,956           $115,800              $ 99,956               $96 554
   Additions                         29,896                 4,284             44,525                 4,284                11,454
   Scheduled amortization               780                   320              1,552                   320                   973
   Prepayments                        7,563                 3,833             17,149                 3,833                 6,403
   Foreclosures                         280                   129                593                   129                   370
   Sales of servicing                   417                    40              1,378                    40                   306
                           -----------------  --------------------  -----------------  --------------------  --------------------
       Total reductions               9,040                 4,322             20,672                 4,322                 8,052
                           -----------------  --------------------  -----------------  --------------------  --------------------
Balance at end of period           $139,653              $ 99,918          $ 139,653              $ 99,918               $99,956
                           =================  ====================  =================  ====================  ====================
</TABLE>


      The number of loans  serviced at March 31, 1999 was 1,640,279  compared to
1,182,913  at March 31,  1998.  HomeSide's  strategy  is to build  its  mortgage
servicing   portfolio  by   concentrating  on  variable  cost  loan  origination
strategies,  and as a result, benefit from improved economies of scale. A key to
HomeSide's  future growth is its  proprietary  servicing  software.  This system
allows  HomeSide  to double the number of loans  typically  serviced on a single
system. For the three and six months ended March 31, 1999,  substantially all of
the servicing portfolio is serviced on the proprietary system.

Results of Operations

For the three months ended March 31, 1999  compared to the period from  February
11, 1998 to March 31, 1998

   Summary

      HomeSide's  net  income,   excluding   goodwill   amortization   from  the
acquisition of HomeSide by the National, increased 13% on an annualized basis to
$24.3  million  for the three  months  ended  March 31,  1999  compared to $10.7
million for the period from  February  11,  1998 to March 31,  1998.  Net income
after the goodwill amortization from the acquisition of HomeSide by the National
for the three months ended March 31, 1999 was $15.4 million.  Total revenues for
the three  months  ended March 31, 1999 were  $105.2  million  compared to $44.6
million  for the  period  from  February  11,  1998 to March  31,  1998,  an 18%
annualized   increase.   The  increases  in  net  income,   excluding   goodwill
amortization, and revenues for the three months ended March 31, 1999 compared to
the period from February 11, 1998 to March 31, 1998 were primarily  attributable
to increases in net mortgage  origination revenue and net interest revenue.  Net
mortgage  origination  revenue increased on an annualized basis primarily due to
increased margins on loan production activities.  Net interest revenue increased
on  an   annualized   basis  due  to   increases  in  the  balances  of  average
interest-earning assets and as a result of reduced borrowing costs from improved
credit ratings and the issuance of medium-term  notes and commercial  paper. Net
servicing revenue was approximately equal on an annualized basis,  primarily due
to an increase in amortization  expense,  partially offset by an increase in the
servicing  portfolio.  Declining  interest rates increased  mortgage  prepayment
speeds and consequently increased amortization expense. Total expenses increased
as a result of expenses associated with the growing mortgage servicing portfolio
and high loan prepayment activity.

    Net Servicing Revenue

      Net  servicing  revenue was $47.6 million for the three months ended March
31, 1999  compared to $26.9  million  for the period from  February  11, 1998 to
March 31, 1998, an 11% annualized  decrease.  Net servicing revenue is comprised
of mortgage servicing fees,  ancillary  servicing  revenue,  and amortization of
mortgage servicing rights.

      Mortgage  servicing  fees  increased 12% on an annualized  basis to $144.5
million for the three months ended March 31, 1999  compared to $64.3 million for
the period from  February 11, 1998 to March 31,  1998,  primarily as a result of
portfolio  growth.  The servicing  portfolio  increased  $39.7 billion to $139.7
billion at March 31, 1999  compared to $99.9  billion at March 31,  1998,  a 40%
increase.  A  significant  portion  of  this  portfolio  growth  was  due to the
purchases of Banc One Mortgage's  $16.6 billion  servicing  portfolio on June 5,
1998 and First Chicago NBD Mortgage Company's $18 billion servicing portfolio on
March 4, 1999.  HomeSide's weighted average interest rates of the mortgage loans
in the servicing  portfolio were 7.55% and 7.82% at March 31, 1999 and March 31,
1998,  respectively.  The weighted average  servicing fee,  including  ancillary
income, for the servicing  portfolio was 0.471% for the three months ended March
31, 1999  compared to 0.463% for the period from  February 11, 1998 to March 31,
1998.  The increase in the weighted  average  servicing fee was due to growth of
ancillary revenues, including late fees and other mortgage related products.

      Amortization  expense was $96.8  million for the three  months ended March
31, 1999  compared to $37.4  million  for the period from  February  11, 1998 to
March 31, 1998, a 30% annualized increase. Amortization expense increased mainly
as a result of a higher  average  balance  of  mortgage  servicing  rights and a
decrease of 13 basis  points in average  mortgage  interest  rates from 7.35% at
March 31,  1998 to 7.22% at March 31,  1999.  Amortization  charges  are  highly
dependent  upon the level of  prepayments  during  the  period  and  changes  in
prepayment expectations, which are significantly influenced by the direction and
level of long-term  interest  rate  movements.  A decrease in mortgage  interest
rates  results  in an  increase  in  prepayment  estimates  used in  calculating
periodic amortization  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.

   Net Interest Revenue

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

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

        Overall  borrowing  costs also fluctuate with changes in interest rates.
Currently, the interest expense HomeSide pays to finance mortgage loans held for
sale and other net assets is generally  calculated  with reference to short-term
interest rates. In addition,  because mortgage loans held for sale earn interest
based on longer term interest rates,  the level of net interest  revenue is also
influenced by the spread between long-term and short-term interest rates.

      Net  interest  revenue  totaled  $15.2  million for the three months ended
March 31, 1999 compared to $2.8 million for the period from February 11, 1998 to
March 31, 1998, a 168% annualized increase. The increase in net interest revenue
was primarily  due to increases in the average  balances of loans held for sale,
escrow  deposits,  and early pool  buyout  advances.  The  average  balance  for
mortgage  loans held for sale for the three months ended March 31, 1999 was $2.3
billion, compared to $1.3 billion for the period from February 11, 1998 to March
31,  1998.  The average  balance for escrow  deposits for the three months ended
March 31, 1999 was $2.8  billion,  compared to $2.5  billion for the period from
February 11, 1998 to March 31, 1998.  The average  balance for early pool buyout
advances for the three months ended March 31, 1999 was $0.5 billion, compared to
$0.4  billion for the period from  February  11, 1998 to March 31,  1998.  Lower
funding  rates  obtained  through  improved  credit  ratings and the issuance of
medium-term  notes and  commercial  paper also  contributed  to increases in net
interest income.

Net Mortgage Origination Revenue

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

      Net mortgage  origination  revenue was $41.6  million for the three months
ended March 31, 1999  compared to $14.3 million for the period from February 11,
1998 to March 31, 1998, a 46% annualized  increase.  This increase was primarily
due to an increase in margins caused by a declining interest rate environment.

   Other Income

       Other  income for the three  months ended March 31, 1999 was $0.7 million
compared  to $0.6  million for the period  from  February  11, 1998 to March 31,
1998, a 41%  annualized  decrease.  The decrease was due to volume  decreases in
real estate tax service fees.

   Salaries and Employee Benefits

      Salaries and  employee  benefits  expense was $33.8  million for the three
months  ended  March 31,  1999  compared  to $14.6  million  for the period from
February  11, 1998 to March 31,  1998, a 16%  annualized  increase.  The average
number of full-time  equivalent  employees  was 2,647 for the three months ended
March 31, 1999  compared to 1,968 for the period from February 11, 1998 to March
31, 1998.  The increases in salaries and employee  benefits  expense and average
number  of  full-time  equivalent   employees  are  primarily   attributable  to
additional  expenses  and  employees to service the growing  mortgage  servicing
portfolio and increased prepayment activity.

   Occupancy and Equipment Expense

      Occupancy and equipment expense primarily includes rental expense, repairs
and maintenance  costs,  certain computer  software expenses and depreciation of
HomeSide's premises and equipment. Occupancy and equipment expense for the three
months  ended March 31, 1999 was $6.7  million  compared to $2.4 million for the
period from February 11, 1998 to March 31, 1998, a 40% annualized increase.  The
increase in expense was mainly due to the increased expenses incurred to enhance
processing  systems and technology  expenditures  necessary to support  targeted
business growth.

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

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

      The  servicing  losses on  investor-owned  loans  and  foreclosure-related
expenses totaled $8.9 million for the three months ended March 31, 1999 compared
to $1.8 million for the period from  February  11, 1998 to March 31,  1998.  The
increase  was due to the  growth  of the  portfolio  and  increased  foreclosure
losses, which may continue at this level as the servicing portfolio ages.

      Included  in the balance of accounts  payable and accrued  liabilities  at
March 31, 1999 is a reserve for  estimated  servicing  losses on  investor-owned
loans of $21.7 million.  The reserve has been  established for potential  losses
related to the  mortgage  servicing  portfolio.  Increases  to the  reserve  are
charged to earnings as servicing losses on investor-owned  loans. The reserve is
decreased  for  actual  losses  incurred  related  to  the  mortgage   servicing
portfolio.  HomeSide's historical loss experience on VA loans generally has been
consistent with industry  experience.  Management  believes that HomeSide has an
adequate  level of reserve  based on servicing  volume,  portfolio  composition,
credit quality and historical  loss rates,  as well as estimated  future losses.
Servicing losses are generally  greatest during the three to six year age of the
loan.

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


                                                   Servicing Portfolio Delinquencies
                                                        (percent by loan count)

                                                                                   March 31, 1999          March 31, 1998
                                                                                   --------------          --------------
<S>                                                                               <C>                     <C>
Servicing Portfolio Delinquencies, excluding bankruptcies (at end of period)
          30 days                                                                       2.85%                  3.20%
          60 days                                                                       0.56%                  0.67%
          90+ days                                                                      0.57%                  0.61%
                                                                                 ====================    ===================
               Total past due                                                           3.98%                  4.48%
                                                                                 ====================    ===================

          Foreclosures pending                                                          0.77%                  0.80%
                                                                                 ====================    ===================
</TABLE>


      As a result  of a larger  and more  mature  portfolio  at March  31,  1999
compared  to March  31,  1998,  servicing  losses  on  investor-owned  loans and
foreclosure-related  expenses increased while servicing portfolio  delinquencies
decreased.

   Other Expenses and Goodwill Amortization

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

      Other expenses,  excluding  goodwill  amortization from the acquisition of
HomeSide by National  Australia  Bank,  were $15.9  million for the three months
ended March 31, 1999  compared to $8.2 million for the period from  February 11,
1998 to March 31, 1998, a 3% annualized decrease. The decrease in other expenses
was  primarily  due to  expenses  associated  with lower  annualized  production
volumes. Goodwill amortization was $9.0 million and $4.9 million,  respectively,
for the three months ended March 31, 1999 and the period from  February 11, 1998
to March 31, 1998.

   Income Tax Expense

      HomeSide's income tax expense was $15.6 million for the three months ended
March 31, 1999 compared to $6.9 million for the period from February 11, 1998 to
March 31, 1998. The effective  income tax rates for the three months ended March
31,  1999 and the period from  February  11, 1998 to March 31, 1998 were 50% and
54%, respectively.


Results of Operations

For the six months ended March 31, 1999 compared to the period from February 11,
1998 to March 31,  1998 and the  predecessor  period from  September  1, 1997 to
February 10, 1998 combined

   Summary

      HomeSide's  net  income,   excluding   goodwill   amortization   from  the
acquisition  of HomeSide by the  National,  was $47.1 million for the six months
ended March 31, 1999, a 16%  annualized  increase  compared to $10.7 million for
the period from  February 11, 1998 to March 31, 1998 combined with $36.8 million
for the  predecessor  period from  September 31, 1997 to February 10, 1998.  Net
income after the goodwill  amortization  from the acquisition of HomeSide by the
National  for the six  months  ended  March 31,  1999 was $29.2  million.  Total
revenues for the six months ended March 31, 1999 were $209.6 million compared to
$44.6 million for the period from February 11, 1998 to March 31, 1998 and $134.7
million for the predecessor  period from September 1, 1997 to February 10, 1998,
a 36%  annualized  increase.  The  increases in net income,  excluding  goodwill
amortization,  and revenues for the six months ended March 31, 1999  compared to
the  period  from  February  11,  1998 to  March  31,  1998  combined  with  the
predecessor  period from  September 1, 1997 to February 10, 1998 were  primarily
attributable to increases in net mortgage  origination  revenue and net interest
revenue.  Net mortgage  origination  revenue  increased on an  annualized  basis
primarily  due to increased  production  volumes and margins on loan  production
activities.  Net  interest  revenue  increased  on an  annualized  basis  due to
increases in the balances of average  interest-earning assets and as a result of
reduced  borrowing  costs from  improved  credit  ratings  and the  issuance  of
medium-term  notes and commercial  paper. Net servicing  revenue  increased less
than 1% on an  annualized  basis  primarily  due to an increase in  amortization
expense,  offset by an increase in the servicing  portfolio.  Declining interest
rates  increased  mortgage   prepayments   speeds  and  consequently   increased
amortization  expense.  Total  expenses  increased on an  annualized  basis as a
result of increases in production volume,  expenses  associated with the growing
mortgage servicing portfolio and high loan prepayment activity.

    Net Servicing Revenue

      Net servicing revenue was $98.1 million for the six months ended March 31,
1999  compared to $26.9  million for the period from  February 11, 1998 to March
31, 1998 and $87.2 million for the predecessor  period from September 1, 1997 to
February 10, 1998,  aproximately  equal on an  annualized  basis.  Net servicing
revenue is comprised of mortgage  servicing fees,  ancillary  servicing revenue,
and amortization of mortgage servicing rights.

      Mortgage  servicing  fees  increased 26% on an annualized  basis to $278.6
million for the six months  ended March 31, 1999  compared to $64.3  million for
the period from February 11, 1998 to March 31, 1998 combined with $194.7 million
for the  predecessor  period  from  September  1,  1997 to  February  10,  1998,
primarily as a result of portfolio  growth.  The servicing  portfolio  increased
$39.7  billion to $139.7  billion at March 31, 1999 compared to $99.9 billion at
March 31, 1998, a 40% increase.  A significant  portion of this portfolio growth
was  due to the  purchases  of  Banc  One  Mortgage's  $16.6  billion  servicing
portfolio on June 5, 1998 and First  Chicago NBD Mortgage  Company's $18 billion
servicing portfolio on March 4, 1999.  HomeSide's weighted average interest rate
of the mortgage  loans in the  servicing  portfolio was 7.55% and 7.82% at March
31, 1999 and March 31, 1998,  respectively.  The weighted average servicing fee,
including  ancillary income, for the servicing  portfolio was 0.469% for the six
months ended March 31, 1999  compared to 0.463% for the period from February 11,
1998 to March 31, 1998 and 0.451% for the  predecessor  period from September 1,
1997 to February 10, 1998.  The increase in the weighted  average  servicing fee
was due to growth of ancillary revenues,  including late fees and other mortgage
related products.

      Amortization expense was $180.5 million for the six months ended March 31,
1999  compared to $37.4  million for the period from  February 11, 1998 to March
31, 1998 combined with $107.5 million for the predecessor  period from September
1, 1997 to February 10, 1998, a 45% annualized  increase.  Amortization  expense
increased  mainly as a result of a higher average balance of mortgage  servicing
rights and a decrease of 13 basis points in average mortgage interest rates from
7.35% at March 31,  1998 to 7.22% at March 31,  1999.  Amortization  charges are
highly dependent upon the level of prepayments  during the period and changes in
prepayment expectations, which are significantly influenced by the direction and
level of long-term  interest  rate  movements.  A decrease in mortgage  interest
rates  results  in an  increase  in  prepayment  estimates  used in  calculating
periodic amortization  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.

   Net Interest Revenue

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

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

      Overall  borrowing  costs also fluctuate  with changes in interest  rates.
Currently, the interest expense HomeSide pays to finance mortgage loans held for
sale and other net assets is generally  calculated  with reference to short-term
interest rates. In addition,  because mortgage loans held for sale earn interest
based on longer term interest rates,  the level of net interest  revenue is also
influenced by the spread between long-term and short-term interest rates.

      Net interest  revenue totaled $29.1 million for the six months ended March
31, 1999 compared to $2.8 million for the period from February 11, 1998 to March
31, 1998 combined with $0.1 million for the predecessor period from September 1,
1997 to February 10, 1998.  Increases in net interest  revenue on an  annualized
basis were  primarily due to increases in net interest  earned on mortgage loans
held for sale,  escrow deposits,  and early pool buyout advances.  Lower funding
rates  obtained  through  improved  credit  ratings and the issue of medium-term
notes and commercial paper also contributed to increases in net interest income.

    Net Mortgage Origination Revenue

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

      Net  mortgage  origination  revenue  was $79.9  million for the six months
ended March 31, 1999  compared to $14.3 million for the period from February 11,
1998 to March 31, 1998 combined with $46.7  million for the  predecessor  period
from  September 1, 1997 to February 10, 1998, a 53%  annualized  increase.  This
increase  was due to  increases  in  production  volumes  and  margins  due to a
declining interest rate environment.

   Other Income

       Other  income for the six months  ended March 31,  1999 was $2.5  million
compared to $0.6 million for the period from February 11, 1998 to March 31, 1998
combined with $0.6 million for the predecessor  period from September 1, 1997 to
February 10, 1998,  a 134%  annualized  increase.  The  annualized  increase was
primarily due to volume increases in real estate tax service fees.

   Salaries and Employee Benefits

      Salaries  and  employee  benefits  expense  was $68.3  million for the six
months  ended  March 31,  1999  compared  to $14.6  million  for the period from
February  11,  1998 to March  31,  1998  combined  with  $36.1  million  for the
predecessor period from September 1, 1997 to February 10, 1998, a 57% annualized
increase. The average number of full-time equivalent employees was 2,572 for the
six months ended March 31, 1999  compared to 1,968 for the period from  February
11, 1998 to March 31, 1998 and 1,848 for the  predecessor  period from September
1, 1997 to February 10, 1998.  The  increases in salaries and employee  benefits
expense and average  number of  full-time  equivalent  employees  are  primarily
attributable  to  additional  expenses  and  employees  to service  the  growing
mortgage  servicing  portfolio,  increased  prepayment  activity  and  increased
production volume.

   Occupancy and Equipment Expense

      Occupancy and equipment expense primarily includes rental expense, repairs
and maintenance  costs,  certain computer  software expenses and depreciation of
HomeSide's  premises and equipment.  Occupancy and equipment expense for the six
months ended March 31, 1999 was $13.1  million  compared to $2.4 million for the
period from  February 11, 1998 to March 31, 1998  combined with $7.8 million for
the  predecessor  period from  September  1, 1997 to February  10,  1998,  a 50%
annualized  increase.  The  increase in expense was mainly due to the  increased
expenses  incurred to enhance  processing  systems and  technology  expenditures
necessary to support targeted business growth.

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

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

      The  servicing  losses on  investor-owned  loans  and  foreclosure-related
expenses  totaled $18.6 million for the six months ended March 31, 1999 compared
to $1.8 million for the period from February 11, 1998 to March 31, 1998 combined
with $11.5 million for the predecessor period from September 1, 1997 to February
10, 1998, a 64% annualized  increase.  The increase was due to the growth of the
portfolio and increased  foreclosure losses, which may continue at this level as
the servicing portfolio ages.

      Included  in the balance of accounts  payable and accrued  liabilities  at
March 31, 1999 is a reserve for  estimated  servicing  losses on  investor-owned
loans of $21.7 million.  The reserve has been  established for potential  losses
related to the  mortgage  servicing  portfolio.  Increases  to the  reserve  are
charged to earnings as servicing losses on investor-owned  loans. The reserve is
decreased  for  actual  losses  incurred  related  to  the  mortgage   servicing
portfolio.  HomeSide's historical loss experience on VA loans generally has been
consistent with industry  experience.  Management  believes that HomeSide has an
adequate  level of reserve  based on servicing  volume,  portfolio  composition,
credit quality and historical  loss rates,  as well as estimated  future losses.
Servicing losses are generally  greatest during the three to six year age of the
loan.

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

                                                   Servicing Portfolio Delinquencies
                                                        (percent by loan count)

                                                                                     March 31, 1999      March 31, 1998
                                                                                  
<S>                                                                              <C>                     <C>
Servicing Portfolio Delinquencies, excluding bankruptcies (at end of period)
          30 days                                                                       2.85%                  3.20%
          60 days                                                                       0.56%                  0.67%
          90+ days                                                                      0.57%                  0.61%
                                                                                 ====================    ===================
               Total past due                                                           3.98%                  4.48%
                                                                                 ====================    ===================

          Foreclosures pending                                                          0.77%                  0.80%
                                                                                 ====================    ===================

</TABLE>

      As a result  of a larger  and more  mature  portfolio  at March  31,  1999
compared  to March  31,  1998,  servicing  losses  on  investor-owned  loans and
foreclosure-related  expenses increased while servicing portfolio  delinquencies
decreased.

   Other Expenses and Goodwill Amortization

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

      Other expenses,  excluding  goodwill  amortization from the acquisition of
HomeSide by National Australia Bank, were $32.4 million for the six months ended
March 31, 1999 compared to $8.2 million for the period from February 11, 1998 to
March 31,  1998  combined  with $19.1  million for the  predecessor  period from
September  1,  1997 to  February  10,  1998,  a 39%  annualized  increase.  This
annualized increase was primarily due to increased production volumes.  Goodwill
amortization totaled $17.9 million for the six months ended March 31, 1999, $4.9
million for the period from February 11, 1998 to March 31, 1998 and $0.3 million
for the  predecessor  period from  September 1, 1997 to February  10, 1998.  The
increase  was due to the  purchase of HomeSide  by  National  Australia  Bank on
February 10, 1998.

   Income Tax Expense

      HomeSide's  income tax expense was $30.1  million for the six months ended
March 31, 1999 compared to $6.9 million for the period from February 11, 1998 to
March 31, 1998 and $23.3 million for the  predecessor  period from  September 1,
1997 to February 10,  1998.  The  effective  income tax rates for the six months
ended  March 31, 1999 and the period  from  February  11, 1998 to March 31, 1998
were  51%  and  54%,  respectively.  The  effective  income  tax  rate  for  the
predecessor  period from  September  1, 1997 to February  10, 1998 was 39%.  The
increase from the predecessor period was due to the tax effects of goodwill as a
result of the merger with the National.


Risk Management Activities

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

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

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

     During  the six  months  ended  March  31,  1999,  deferred  losses on risk
management  contracts  resulted in net deferred  hedge losses of $176.8  million
which are included in the carrying value of mortgage servicing rights.  Activity
in the deferred  hedge account  during the six months ended March 31, 1999 is as
follows (in thousands):

     Net deferred hedge balance at September 30, 1998           $  389,572
     Net deferred hedge loss                                      (553,168)
     Amortization                                                (  13,192)
                                                              ==================
     Net deferred hedge balance at March 31, 1999                 (176,788)
                                                              ==================

    HomeSide's  future cash needs as they relate to its hedging  program will be
influenced by such factors as long-term  interest rates,  loan production levels
and  growth in the  mortgage  servicing  portfolio.  The fair value of open risk
management  contracts  at March 31,  1999 was  $(9.7)  million.  This  amount is
comprised of interest rate swaps with a fair value of $(68.8) million, partially
offset by futures and options on U.S. Treasury bonds with a fair market value of
$59.1  million.  The premiums  paid on options along with amounts due to or from
counterparties related to risk management contracts are included in Other Assets
and Other  Liabilities  in the  accompanying  consolidated  balance  sheet.  See
"Liquidity and Capital  Resources" for further  discussion of HomeSide's sources
and uses of cash. See Note 3 of Notes to Consolidated Financial Statements for a
description of HomeSide's  accounting  policy for its risk management  contracts
and Notes 13 and 14 of Notes to Consolidated Financial Statements for additional
fair value  disclosures  with respect to HomeSide's  risk  management  contracts
included  in  HomeSide's  Form 10-K for the period  from  February  11,  1998 to
September 30, 1998.

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, an independent
syndicate   of   banks,   including   a   warehouse   credit   facility   and  a
servicing-related facility, and cash flow from operations. HomeSide continues to
investigate  and pursue  alternative  and  supplementary  methods to finance its
growing  operations  through the public and private capital  markets.  These may
include methods designed to expand the Company's  financial  capacity and reduce
its cost of capital.  In addition,  to facilitate the sale and  distribution  of
certain mortgage products,  HomeSide Mortgage  Securities,  Inc., a wholly-owned
subsidiary  of HomeSide  Lending,  Inc.,  may continue to issue  mortgage-backed
securities.

Operations

     Net cash  provided by  operations  for the three and six months ended March
31, 1999 was $597.6 million and $617.9 million,  respectively.  Net cash used in
operations  for the period from  February  11, 1998 to March 31, 1998 was $235.1
million.  Net cash used in operations for the predecessor  period from September
1, 1997 to February 10, 1998 was $157.7  million.  Cash provided from  servicing
fee income,  loan sales and principal  repayments  was partially  offset by cash
used for the origination and purchase of mortgage loans held for sale and to pay
corporate expenses. Cash flows from loan originations are dependent upon current
economic  conditions  and the level of long-term  interest  rates.  Decreases in
long-term  interest rates generally result in higher loan refinancing  activity,
which results in higher cash demands to meet increased loan  production  levels.
Higher cash demands to meet increased loan  production  levels are primarily met
through borrowings and loan sales.

Investing

    Net cash used in  investing  activities  for the three and six months  ended
March 31, 1999 were $644.3 million and $853.3  million,  respectively.  Net cash
provided by investing  activities for the period from February 11, 1998 to March
31,  1998 was $226.5  million.  Net cash used in  investing  activities  for the
predecessor  period  from  September  1,  1997 to  February  10,  1998 was $60.8
million.  Cash used in investing  activities  was  primarily for the purchase of
mortgage  servicing  rights,  risk management  contracts,  and early pool buyout
advances. Cash was provided by proceeds from risk management contracts and early
pool  buyout  reimbursements.  Other  assets  decreased  $28.1  million to $89.5
million at March 31, 1999 from $117.6 million at September 30, 1998 primarily as
a result of decreases in  HomeSide's  hedge assets.  Early pool buyout  advances
totaled $453.3 million at March 31, 1999 compared to $759.6 million at September
30,  1998 as a result of  re-instatements  and  sales of  advances  to  HomeSide
Funding,  Inc. 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 three and six months ended
March 31, 1999 were $10.7  million and $251.5  million,  respectively.  Net cash
provided by financing  activities for the period from February 11, 1998 to March
31, 1998 was $443.5 million.  Net cash provided by financing  activities for the
predecessor  period  from  September  1, 1997 to  February  10,  1998 was $250.6
million.  Cash was provided by the issuance of commercial  paper and medium-term
notes, borrowings from the National, and borrowings on HomeSide's line of credit
during  the  periods.  Cash  was  used to repay  borrowings  from the  National,
commercial  paper,  borrowings on the line of credit and to pay dividends to the
Parent.

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


Year 2000

General.  In common with many business users of computers  around the world, the
Company  has  investigated  to what extent the date change from 1999 to 2000 may
affect its business.  The Company has established a program designed to minimize
the impact of the change to 2000 on the Company and its customers.  The Board of
Directors  has made the work  associated  with the change to 2000 a key priority
for management.

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

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

o    End-to-end  testing of all mission  critical  systems with  material  third
     parties to be substantially completed by March 31, 1999; and

o    Remediation  and  testing  of  all  non-mission   critical  systems  to  be
     substantially  completed  by June 30,  1999  and  clean  management  of all
     systems through 1999.

The  Company  has  completed  its  assessment  of  all  systems  and  processes.
Remediation and internal  testing of mission  critical  systems is substantially
complete.  Set forth below is a graphical  depiction of the  Company's  state of
readiness in the first five action phases of the Company's project plan, divided
to show progress as to the  Information  Technology (IT) portion of the project,
the Company's two primary servicing systems,  and the end-user computing portion
of the project.

<TABLE>
<CAPTION>

                   IT Achievements (excludes servicing systems)                                      
                                                                                       Date              % Complete
<S>                                                                                   <C>                 <C>
  Assessment
  Full assessment of all IT components impacted by the turn of the century.              6/30/98              100%

  Remediation
  Repair or Replace all IT components found to be non-compliant.                         9/30/98               68%
                                                                                        10/31/98               91%
                                                                                        12/31/98              100%
  Testing Internal
  Test all IT Y2K impacted internal components in a simulated and real future            9/30/98               30%
  date environment.                                                                     10/31/98               41%
                                                                                        12/11/98               76%
                                                                                        12/31/98               80%
                                                                                         1/31/99               93%
                                                                                         3/31/99              100%
  Testing External
  Testing with customers, and vendors/service providers.                                12/11/98                0%
                                                                                         1/31/99                0%
                                                                                         3/31/99               42%
                                                                                         4/30/99               42%
                                                                                         6/30/99              100%
  Implementation
  Place into the production operating environment all IT components tested               9/30/98               17%
  and deemed to be Y2K ready.                                                           10/31/98               26%
                                                                                        12/31/98               87%
                                                                                         1/31/99               89%
                                                                                         3/31/99              100%
  Check-off
  Official sign-off by the business and technology owner of the component                9/30/98                5%
  that the component is Y2K ready.                                                      10/31/98               17%
                                                                                        12/31/98               65%
                                                                                         1/31/99               78%
                                                                                         3/31/99               83%
                                                                                         4/30/99              100%

</TABLE>

The chart set forth above shows the status of  completion of the number of gross
technology  applications  identified by the Company for remediation  measured by
each of the  various  phases of the  Company's  Year 2000  Program.  This  chart
measures  the  progress  on   thirty-four   (34)  key   Information   Technology
applications,  of which fourteen (14) have been designated as mission  critical.
As to  these  thirty-four  (34)  key  applications,  as of  December  31,  1998,
assessment  was 100%  complete,  remediation  was 100%  complete,  and  internal
testing was 80% complete.  As to the thirty-four  (34) key  applications,  as of
March 31, 1999,  internal testing was completed in accordance with the Company's
test strategy and applicable  test plans.  As at that date,  End-to-End  testing
with material third parties was 42% complete.  As to these  thirty-four (34) key
applications,  as of April 30, 1999, the most recent date for which  information
is available prior to this filing,  internal testing was completed in accordance
with the Company's  test strategy and  applicable  test plans.  As at that date,
End-to-End  testing with material third parties remained at 42% complete for the
reasons set out below.

End-to-End  testing with external parties is ongoing.  The Company had initially
established an internal milestone of March 31, 1999 for completion of End-to-End
testing with material  external  parties.  This milestone is more ambitious than
the regulatory deadline of June 30, 1999 established by the FFIEC for completing
external testing. The Company worked extensively with material external parties,
including key vendors,  suppliers  and  counter-parties,  throughout  the fourth
quarter of 1998 and the first  quarter of 1999 to produce test plans and prepare
for End-to-End testing.  Although substantially all test plans were produced and
delivered to material  external  parties by March 31, 1999,  delays in responses
from them  prevented the Company from  achieving  its March 31, 1999  milestone.
Many of the Company's  material external parties are vendors and suppliers.  The
Company recognized that many of our key vendors have regulatory requirements and
material third party  dependencies of their own, and that those requirements and
dependencies had to be prioritized  above testing with the Company.  The Company
values  its  relationships  with its key  vendors  and has  worked  with them to
accommodate their competing  priorities even those that  necessitated  extending
the Company's own date for this milestone.

As of April 30, 1999, the Company had  successfully  completed  external testing
with several key vendors and counter-parties,  including Fannie Mae, Freddie Mac
and Ginnie  Mae.  Testing  with  material  external  parties is  expected  to be
substantially complete by June 30, 1999, the FFIEC deadline.

As to the  fourteen  (14) mission  critical  applications  (excluding  servicing
systems  which  are  separately  discussed  below),  as of  December  31,  1998,
assessment  was 100%  complete,  remediation  was 100%  completed,  and internal
testing was 88%  complete.  As of January 31,  1999,  internal  testing of these
mission  critical  applications  was completed in accordance  with the Company's
test  strategy  and  applicable  test  plans.  Since that date,  the Company has
engaged  in   additional   assurance   testing  and  clean   management  of  the
applications, a process that will continue throughout 1999.

The Company's two most critical  business  applications are its primary mortgage
servicing  software  systems:   MSP  (licensed  from  and  supported  by  Alltel
Information Services, Inc.) and ALSS (a proprietary software system supported by
the Company).  Because of their critical importance to the Company's operations,
these systems are not included in the above chart. Rather,  progress as to these
two systems is set forth separately in the chart below. As to these two systems,
as of December 31, 1998,  assessment  was 100%  complete,  remediation  was 100%
complete,  and internal testing was 95% complete. As to these two systems, as of
January  31,  1999,  internal  testing  was  completed  in  accordance  with the
Company's test strategy and applicable test plans.  Since that date, the Company
has  engaged  in  additional  assurance  testing  and  clean  management  of the
applications,  a process that will  continue  throughout  1999.  As to these two
systems,  as of March 31, 1999,  external testing was 80% complete.  As to these
two systems, as of April 30, 1999, the most recent date for which information is
available prior to this filing, external testing was 88% complete.
<TABLE>
<CAPTION>

                       IT Achievements (servicing systems)                                           
                                                                                          Date           % Complete
<S>                                                                                    <C>               <C>
  Assessment
  Full assessment of all IT components impacted by the turn of the century.              9/30/98              100%

  Remediation
  Repair or Replace all IT components found to be non-compliant.                         9/30/98               90%
                                                                                        12/31/98              100%
  Testing Internal
  Test all IT Y2K impacted internal components in a simulated and real future           12/31/98               95%
  date environment.                                                                      1/31/99              100%
                                                                                         3/31/99              100%

  Testing External
  Testing with customers, and vendors/service providers.                                12/31/98                0%
                                                                                         1/31/99                0%
                                                                                         3/31/99               80%
                                                                                         3/31/99               88%
                                                                                         3/31/99              100%
  Implementation
  Place into the production operating environment all IT components tested              12/31/98               50%
  and deemed to be Y2K ready.                                                            1/31/99               50%
                                                                                         3/31/99              100%
  Check-off
  Official sign-off by the business and technology owner of the component               12/31/98               50%
  that the component is Y2K ready.                                                       1/31/99               50%
                                                                                         3/31/99               50%
                                                                                         6/30/99              100%

</TABLE>

The  Company's  Year 2000  Program  also  addresses  end-user  computing  issues
presented by the year 2000 change.  The  following  chart  depicts the Company's
progress in addressing  systems and business  processes  other than  information
technology  systems.  As to those business processes and systems, as of December
31, 1998, assessment was 100% complete, remediation was 96% complete and testing
was 56% complete.  As to those business  processes and systems,  as of March 31,
1999,  remediation  was  substantially  complete  and testing was 83%  complete.
Testing, Implementation and Check-Off is scheduled to be completed prior to June
30, 1999.


<TABLE>
<CAPTION>




                          End-User Computing Achievements                                            
                                                                                          Date            % Complete
<S>                                                                                    <C>                <C>
  Assessment
  Full assessment of all non-IT components impacted by the turn of the century.         12/31/98              100%

  Remediation
  Repair or replace all non-IT components found to be non-compliant.                    12/31/98               96%
                                                                                         3/31/99               97%
                                                                                         6/30/99              100%
  Testing
  Test all non-IT Y2K impacted components in a simulated and real future date           12/31/98               56%
  environment. Includes testing with customers, and vendors/service providers.           1/31/99               76%
                                                                                         3/31/99               83%
                                                                                         6/30/99              100%
  Implementation
  Place into the production operating environment all non-IT components                 12/31/98               22%
  tested and deemed to be Y2K ready.                                                     1/31/99               76%
                                                                                         3/31/99               79%
                                                                                         6/30/99              100%
  Check-off
  Official sign-off by the business owner of the non-IT component that the              12/31/98               28%
  component is Y2K ready.                                                                1/31/99               69%
                                                                                         3/31/99               74%
                                                                                         6/30/99              100%

</TABLE>

The  information  set  forth  above is not  weighted  to  reflect  the  relative
criticality of individual  applications.  Moreover, not all applications require
the same level of effort for remediation and testing.  Therefore,  a significant
percentage of completion of one phase of the program,  taken out of context, may
not fully reflect the Company's overall state of preparedness.  In addition, the
reality of the Year 2000 work, its breadth, dependencies and linkages (including
satisfactory  and timely  delivery by key vendors)  means that there may be some
work which will not be completed by the milestone target.

The Company has  relationships  with vendors,  customers and other third parties
that rely on software  and systems that may not be ready for the change to 2000.
However, it is not possible in all cases to obtain complete, accurate and timely
information  regarding the Year 2000  programs of third  parties.  Further,  the
Company's  ability to direct such third parties efforts or change relations with
such  third  parties  is often  limited.  There can be no  assurance  that third
parties on which the Company  relies will  complete  their Year 2000 programs on
time or that Year 2000  failures by such third  parties will not have a material
adverse effect on the Company's results of operations.

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

As of March 31, 1999, HomeSide  successfully  completed the mandatory components
of the MBA Year 2000 Readiness  Test.  Optional  components of the MBA Year 2000
Readiness Test will be complete by June 30, 1999.

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

Cost of Year 2000  Efforts.  The  Company  acknowledges  that  work  needs to be
carried out in virtually  all aspects of its business to ensure that the Company
successfully  manages the change to 2000. The Company presently  estimates these
costs to total  approximately  $13.5  million.  The Company has revised its Year
2000 budget from $15.0 million to $13.5  million.  The  adjustment to the budget
resulted  from lower than  anticipated  expenses  relating to: (1) the Company's
primary  remediation  contractor,  (2) software upgrades,  (3) non-Y2K compliant
equipment  write-offs,  (4) contract labor expenses,  and (5) accounting charges
resulting from  capitalization  of certain software costs which were budgeted to
have been expensed.

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

Through March 31, 1999, the Company had expended  approximately  $7.9 million of
its total Year 2000 budget.  Through  April 30,  1999,  the most recent date for
which  information is available  prior to this filing,  the Company had expended
approximately $8.3 million of its total Year 2000 budget. The Company previously
reported that it anticipated  significant  expenditures during the first quarter
of 1999 associated with End-to-End testing. As noted above, some of that testing
will now occur during the second quarter and,  consequently,  those expenditures
will be distributed over the first and second quarter.

The  Company  anticipates  significant  expenditures  associated  with  employee
retention  efforts,  continued  testing,  clean management of systems,  business
continuity  and  transition  planning and  maintenance  of its Year 2000 Program
Office  through March 31, 2000.  The Company has  allocated  $1.7 million of its
total Year 2000  budget to  transition  management  during the period of 1 June,
1999 through  January 31, 2000.  Additional  expenses  will be incurred  through
March 31, 2000. Clean management of systems involves developing and implementing
procedures  and  practices  to  prevent  the   reintroduction  of  non-compliant
applications,  products  and  processes  into  the  operating  environment  once
Check-Off has been completed.  The Company has developed and implemented a Clean
Management  Strategy on a Company-wide  basis.  Transition planning is concerned
with identifying and preparing for specific issues and risks associated with the
period of  October 1, 1999  through  January  31,  2000.  The  Company is in the
process of developing and implementing a Transition  Strategy.  The objective of
the Company in  transition  planning is to ensure a  Company-wide  capability to
manage externally  generated events as and when they might arise. As part of the
Company's  transition  planning and overall Year 2000  Program,  the Company has
established a moratorium period using a scaled  implementation  plan to restrict
the introduction of minor,  significant and major changes to systems or business
processes.  The  moratorium  period  will not  impair the  Company's  ability to
conduct its core  businesses and meet the needs of its customers.  The Company's
Year 2000 Program will continue until the end of March 2000.  Activities planned
for the first quarter of 2000 include:

o    Monitoring and verification  activities  surrounding  business  information
     systems;

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

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

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

The Company  expensed  its  remediation  costs as they were  incurred,  with the
exception of new hardware and software  purchases,  which were capitalized.  The
source of funds for Year 2000  remediation  is operating  income of the Company.
The percentage of the Company's  information  technology  budget devoted to Year
2000  efforts in the quarter  ended March 31, 1998 was  approximately  12%.  The
Company is unable to readily  determine the cost of replacement of non-compliant
systems  that  are  being  replaced  in the  ordinary  course  of  business.  No
significant  information technology projects have been deferred due to Year 2000
efforts.

The Company's  Year 2000 Program is complex and reliant upon  coordination  with
numerous  third parties.  Accordingly,  the effort and costs in any given period
will depend  upon  progress.  The  Company's  current  Year 2000 budget of $13.5
million is based on the current  status of the Year 2000  Program and is subject
to change.  The budget of $13.5 million does not take into account any potential
losses the Company may suffer as a result of Year 2000  failures,  or any claims
for loss or damage  that may be asserted  against the Company by third  parties,
which may result if the Company or third parties do not successfully  manage the
effect of the Year 2000 date change.

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

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


Contingency Planning. The Company's Year 2000 Program is based on the assumption
that 100% impact coverage is neither feasible nor practical. It is possible that
the  Company or third  parties on which the Company  depends may have  unplanned
system  difficulties  during the transition  through 2000, or that third parties
may not successfully manage the change to 2000;  therefore,  an integral part of
the  Company's  Year 2000 Program is the  development  of  contingency  plans in
anticipation  of systems or third party failure.  These  contingency  plans have
been  developed for  individual  applications,  systems and business  processes.
Individual  departments within the Company,  including  information  technology,
acting under the supervision  and direction of the Year 2000 Program  Enterprise
team,  have  (a)  identified  applicable  Year  2000  events  and  threats,  (b)
considered the  likelihood of occurrence,  (c) determined the severity of impact
of such events and threats,  and (d) created  preventive and continuity plans to
address  such  events  and  threats.  In  addition,   corporate-wide  transition
planning,  which involves the planning for and management of activities relating
to the previously  identified Year 2000 events and threats,  is underway.  Given
the  potential  scope  of  Year  2000  events,   it  is  possible  that  despite
considerable  planning,  the Company's  business  continuity  plans for the date
change to 2000 may only  assist in the  reduction  of the  degree of  disruption
rather than its avoidance.

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


Quantitative and Qualitative Market Risk

     There have been no  material  changes  in the  Company's  market  risk from
September 30, 1998. For information  regarding the Company's  market risk, refer
to Form  10-K  for  the  fiscal  year  ended  September  30,  1998  of  HomeSide
International, Inc.



                           PART II - OTHER INFORMATION

ITEM 1.  Legal Proceedings

      HomeSide is a defendant  in a number of legal  proceedings  arising in the
normal course of business.  HomeSide, in management's  estimation,  has recorded
adequate   reserves  in  the  financial   statements  for  pending   litigation.
Management,  after  reviewing  all actions and  proceedings  pending  against or
involving  HomeSide,  considers  that the  aggregate  liability or loss, if any,
resulting from the final outcome of these  proceedings  will not have a material
effect on the financial position of HomeSide.

      In recent years,  the mortgage  banking industry has been subject to class
action  lawsuits  which  allege   violations  of  federal  and  state  laws  and
regulations,  including the propriety of collecting  and paying various fees and
charges.  Class action  lawsuits may be filed in the future against the mortgage
banking industry.


ITEM 6.  Exhibits and Reports on Form 8-K

(a) The following documents are filed as a part of this Report:

Number            Description

10.1           Mortgage  Loan  Servicing  Purchase  And Sale  Agreement  dated 
                February 26, 1999 between HomeSide Lending, Inc. and First 
                Chicago NBD Mortgage Company
10.2           First Amendment dated March 31, 1999 to Mortgage Loan Servicing 
                Purchase And Sale Agreement dated February 26, 1999 between 
                HomeSide Lending, Inc. and First Chicago NBD Mortgage Company  
27                Financial Data Schedule

 (b)   Reports on form 8-K

         HomeSide filed a report on Form 8-K, Item 5, dated April 22, 1999.









                                                              SIGNATURES

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

                                    HomeSide International, Inc.
                                    (Registrant)

Date: May 14, 1999                  By:   /s/ Joe K. Pickett
                                          ------------------
                                          Joe K. Pickett
                                          Chairman of the Board, Chief Executive
                                            Officer and Director (Principal
                                            Executive Officer)

Date: May 14, 1999                 By:  /s/ Kevin D. Race
                                        ----------------- 
                                        Kevin D. Race
                                        Vice President, Chief Financial Officer
                                          and Treasurer (Principal Financial and
                                          Accounting Officer)