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

                                   FORM 10-Q/A

(Mark one)

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

                  For the quarterly period ended March 31, 2001

                                       OR

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

                           Commission File No. 1-12655

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

           Delaware                                    59-3387041
           --------                                    ----------
(State or other jurisdiction of             (I.R.S. Employer 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 s horter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes _x_ No __



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

     Class                                       Outstanding at December 6, 2001
     -----                                       -------------------------------

Common stock $0.01 par value                             1.724 Shares
Class C non-voting common stock $1.00 par value              none







<PAGE>


                          HOMESIDE INTERNATIONAL, INC.
                                   FORM10-Q/A
                      Quarterly Period Ended March 31, 2001

                                      INDEX

<TABLE>
                                                                                                                            Page No.
                                                                                                                            --------

PART I.  FINANCIAL INFORMATION
<S>                                                                                                                         <C>
ITEM 1.       Financial Statements (unaudited)  (Note A):

              Consolidated Balance Sheets as of March 31, 2001 and September 30, 2000 ..........................................  3

              Consolidated Statements of Income and Comprehensive Income for the Three and Six
                    Months Ended March 31, 2001 and March 31, 2000..............................................................  4

              Consolidated Statements of Cash Flows for the Three and Six Months Ended
                    March 31, 2001 and March 31, 2000...........................................................................  5

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

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


PART II.  OTHER INFORMATION

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

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


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

</TABLE>



Note A

As  discussed in Note 2 of the  consolidated  financial  statements  of HomeSide
International,  Inc. (the "Company")  included herein,  the Company announced on
September 4, 2001 the discovery of an incorrect  interest rate assumption in the
mortgage  servicing  rights model.  As a result,  the Company has determined the
necessity to restate certain previously  reported interim financial  statements.
The  restatement,  as presented  herein,  corrects the effects of the  incorrect
interest rate assumption on the  consolidated  financial  statements and related
notes for the three and six months ended March 31, 2001.


                                       2
<PAGE>



                              FINANCIAL INFORMATION

ITEM 1. Financial Statements
        --------------------


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




<TABLE>

                                                                                           March 31, 2001       September 30, 2000
                                                                                             (Restated)
                                                                                        ---------------------   --------------------
ASSETS

<S>                                                                                           <C>                  <C>
Cash and cash equivalents                                                                     $   190,501          $   110,737
Mortgage loans held for sale, net                                                               1,614,909            1,441,216
Mortgage servicing rights, net                                                                  4,041,074            4,464,312
Risk management instruments at fair value, net                                                    260,806                 --
Early pool buyout advances                                                                        143,418              141,255
Accounts receivable, net                                                                          322,318              324,028
Premises and equipment, net                                                                        83,461               80,052
Goodwill, net                                                                                     594,448              612,018
Other assets                                                                                      137,995               93,415
                                                                                              -----------          -----------

Total Assets                                                                                  $ 7,388,930          $ 7,267,033
                                                                                              ===========          ===========


LIABILITIES AND STOCKHOLDER'S EQUITY

Accounts payable and accrued liabilities                                                      $   704,012          $   587,275
Notes payable                                                                                   3,334,500            3,235,400
Long-term debt                                                                                  2,171,569            1,899,772
Deferred income taxes, net                                                                        152,997              271,369
                                                                                              -----------          -----------

Total Liabilities                                                                               6,363,078            5,993,816
                                                                                              -----------          -----------

Stockholder's Equity:
Common stock:
Common stock, $.01 par value, 100 shares authorized and 1 share issued and
outstanding
Class C non-voting common stock, $1.00 par value, 195,000 shares
authorized, and 0 shares issued and outstanding                                                      --                   --
Additional paid-in capital                                                                      1,231,302            1,231,302
(Accumulated deficit) Retained earnings                                                          (204,898)              41,915
Accumulated other comprehensive (loss)                                                               (552)                --
                                                                                              -----------          -----------

Total Stockholder's Equity                                                                      1,025,852            1,273,217
                                                                                              -----------          -----------

Total Liabilities and Stockholder's Equity                                                    $ 7,388,930          $ 7,267,033
                                                                                              ===========          ===========

</TABLE>




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


                                       3
<PAGE>


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


<TABLE>

                                                         For the Three      For the Three       For the Six         For the Six
                                                          Months Ended       Months Ended       Months Ended        Months Ended
                                                         March 31, 2001     March 31, 2000     March 31, 2001      March 31, 2000
                                                           (Restated)                            (Restated)
                                                           ----------         ----------         ----------          ----------

REVENUES:

<S>                                                        <C>                <C>                <C>                 <C>
Mortgage servicing fees                                    $ 220,255          $ 185,629          $ 428,453           $ 356,827
Amortization of mortgage servicing rights                   (135,392)          (102,659)          (255,654)           (200,187)
Valuation provision of mortgage servicing rights            (277,510)               --            (902,371)                --
Risk management of mortgage servicing rights                 142,589                --             508,062                 --
                                                            ---------          ---------         ---------           ---------
    Net servicing (expense) revenue                          (50,058)            82,970           (221,510)            156,640

Interest income                                               29,150             30,107             57,834              66,272
Interest expense                                             (47,927)           (43,015)           (95,808)            (78,587)
                                                            ---------          ---------         ---------           ---------
    Net interest (expense)                                   (18,777)           (12,908)           (37,974)            (12,315)

Net mortgage origination revenue                              39,560             21,900             62,182              38,908
Other income                                                   1,783              1,248              7,585               2,111
                                                            ---------          ---------         ---------           ---------

   Total (Expenses) Revenues                                 (27,492)            93,210           (189,717)            185,344


EXPENSES:


Salaries and employee benefits                                32,642             25,870             62,520              55,688
Occupancy and equipment                                        9,369              7,719             19,207              16,269
Servicing losses on investor-owned loans
   and foreclosure-related expenses                            8,109              7,386             18,200              15,754
Goodwill amortization                                          8,785              8,974             17,570              17,948
Other expenses                                                15,675              9,315             35,032              22,676
                                                            ---------          ---------         ---------           ---------
    Total Expenses                                            74,580             59,264            152,529             128,335


(Loss) income before income taxes and cumulative
effect of a change in accounting principle                  (102,072)            33,946           (342,246)             57,009
Income tax (benefit) expense                                 (34,058)            15,666           (118,550)             20,559
                                                            ---------          ---------         ---------           ---------

(Loss) income before cumulative effect of a change in
accounting principle                                         (68,014)            18,280           (223,696)             36,450

Cumulative effect of a change in accounting for
derivative instruments and hedging activities, net of
income tax expense of $507                                      --                 --                  883                 --
                                                            ---------          ---------         ---------           ---------
Net (loss) income                                            (68,014)            18,280           (222,813)             36,450

Other comprehensive income, net of tax:
      Cumulative effect of a change in accounting
      for derivative instruments and hedging activities         --                 --               (9,133)                --
      Net gains/(losses) on current period cash flow           2,376               --                 (539)                --
      Less: reclassification adjustment for losses
      included in net income                                      38               --                9,120                 --
                                                            ---------          ---------         ---------           ---------
Other comprehensive income (loss)                              2,414               --                 (552)                --
                                                            ---------          ---------         ---------           ---------

Comprehensive (loss) income                                $ (65,600)         $  18,280          $(223,365)          $  36,450
                                                            =========          =========         =========           =========

</TABLE>

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


                                       4
<PAGE>


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

                             (Dollars in Thousands)

<TABLE>

                                                               For the Three    For the Three     For the Six      For the Six
                                                               Months Ended     Months Ended      Months Ended     Months Ended
                                                               March 31, 2001   March 31, 2000    March 31, 2001   March 31, 2000
                                                                 (Restated)                         (Restated)
                                                               --------------   --------------    --------------   --------------
CASH FLOWS  (USED IN) PROVIDED BY OPERATING
ACTIVITIES AND RISK MANAGEMENT RESULTS:

<S>                                                             <C>               <C>             <C>               <C>
Net (loss) income                                               $ (68,014)        $ 18,280        $  (222,813)      $  36,450
Adjustments to reconcile net (loss) income to net cash
 (used in) provided by operating activities and risk
 management results:
  Amortization  of mortgage servicing rights                      135,392          102,659            255,654         200,187
  Depreciation and amortization                                    12,701           11,546             24,973          23,029
  Cumulative effect of a change in accounting for
   derivative instruments and hedging activities, net                  -                -                (883)             -
  Change in fair value of net hedged assets                        (5,359)              -              (5,511)             -
  Risk management of mortgage servicing rights                   (142,589)              -            (508,062)             -
  Valuation provision of mortgage servicing rights                277,510               -             902,371              -
  Servicing losses on investor-owned loans                            479            2,674              4,039           5,204
  Change in deferred income tax liability                         (34,078)          17,715           (118,562)         22,612
  Origination, purchase and sale of loans held for sale,
   net of repayments                                             (287,473)         412,154           (162,447)        524,488
  Change in accounts receivable                                    10,323           (3,528)            (2,799)        (39,297)
  Change in other assets and accounts payable and accrued
   liabilities                                                     (9,961)         (45,909)           126,723         (54,545)
                                                               --------------   ---------------   --------------   -------------
Net cash (used in) provided by operating activities and risk
 management results                                              (111,069)         515,591            292,683         718,124

CASH FLOWS USED IN INVESTING ACTIVITIES:

Purchase of premises and equipment, net                            (5,603)          (7,192)           (11,685)        (13,443)
Acquisition of mortgage servicing rights                         (297,401)        (123,255)          (734,787)       (358,174)
Net purchase of risk management contracts                         167,850         (414,032)           213,455        (552,839)
Net early pool buyout reimbursements                              (16,961)          28,184             (2,550)        123,180
                                                               --------------   ---------------   --------------   -------------
Net cash used in investing activities                            (152,115)        (516,295)          (535,567)       (801,276)

CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:

Net borrowings (repayments to) from  banks                        160,500         (559,398)            99,100         (64,799)
Net issuance of commercial paper                                  235,000          318,743                 -          336,097
Issuance of medium-term notes                                          -                -             250,000              -
Payment of debt issue costs                                          (755)            (249)            (2,291)         (2,371)
Repayment of long-term debt                                           (82)         (60,223)              (161)        (60,444)
Dividends paid to the National                                         -                -             (24,000)        (24,000)
                                                               --------------   -----------------------------------------------
Net cash provided by (used in) financing activities               394,663         (301,127)           322,648         184,483

Net increase (decrease) in cash and cash equivalents              131,479         (301,831)            79,764         101,331
Cash and cash equivalents at beginning of period                   59,022          606,021            110,737         202,859
                                                               --------------   ---------------   --------------   -------------
Cash and cash equivalents at end of period                      $ 190,501         $304,190        $   190,501       $ 304,190
                                                               ==============   ===============   ==============   =============

Supplemental disclosure of cash flow information:
Interest paid                                                   $  58,656         $ 43,063        $   109,474       $  75,489
Income taxes paid                                               $      21         $    339        $        23       $     342
Income taxes refunded                                                  -          $  2,388        $        14       $   2,395
Impact of cash flow hedges on other comprehensive income, net   $   2,414               -         $      (552)             -

</TABLE>


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


                                       5
<PAGE>



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

1.  BASIS OF PRESENTATION

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

Operating  results for the three- and six-month periods ended March 31, 2001 and
March  31,  2000  are not  necessarily  indicative  of the  results  that may be
expected  for  the  fiscal  period  ending   September  30,  2001.  For  further
information,  refer  to the  consolidated  financial  statements  and  footnotes
thereto  included in the Form 10-K for the fiscal year ended  September 30, 2000
of HomeSide International, Inc. ("HomeSide or the "Company"). See also Note A to
the Index to the Form 10-Q/A above.


2.  RESTATEMENT

As announced on September 4, 2001, the Company  discovered an incorrect interest
rate assumption in the mortgage  servicing rights ("MSR")  valuation model which
caused  the  model to under  estimate  the MSR's  sensitivity  to  movements  in
interest rates,  particularly in a falling rate environment.  During the quarter
ended  December 31, 2000,  mortgage rates declined by 58 basis points from 7.88%
at September  30, 2000 to 7.30% at December 31, 2000 with  substantially  all of
the rate  movement  occurring  in the  second  half of the  quarter.  During the
quarter ended March 31, 2001,  mortgage  rates  continued to decline by 35 basis
points to 6.95% by quarter end.  Had the  valuation  model  included the correct
interest rate assumption,  the model would have estimated faster loan prepayment
speeds and, as a result,  a lower  valuation  of the mortgage  servicing  rights
asset.

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

The Company  recognized a gain of $264.2 million to current  earnings related to
the change in fair value of these  derivatives  for the three months ended March
31, 2001,  and a gain of $634.6  million for the six months ended March 31, 2001
with no  corresponding  hedge offset relative to the change in the fair value of
the  mortgage  servicing  rights  asset.  Consequently,  the Company  reversed a
previously  recorded  change in value of the  mortgage  servicing  rights due to
hedged risk of $217.2  million to current  earnings  for the three  months ended
March 31,  2001 and $565.1  million  for the six months  ended  March 31,  2001.
Pursuant to the guidance provided under Financial  Accounting Standards No. 140,
"Accounting for Transfers and Servicing of Financial Assets and  Extinguishments
of Liabilities" ("SFAS 140'), the Company  subsequently  performed an impairment
evaluation  of the  mortgage  servicing  rights  and  recognized  an  additional
valuation  provision  of $272.0  million to earnings  for the three months ended
March 31,  2001,  and $886.4  million for the six months  ended March 31,  2001.
Accordingly,  the  consolidated  statement  of income for the three months ended
March 31, 2001,  as restated,  reflects a pretax net  reduction in net servicing
revenues and pretax  income of $54.8  million and a related tax benefit of $20.0
million,  for a net reduction in previously  reported earnings of $34.8 million.
For the six months ended March 31, 2001, the consolidated statement of income as
restated, reflects a pretax net reduction in net servicing (expense) revenue and
pretax  income of  ($321.3)  million  and a related  tax  (benefit)  of ($117.3)
million, for a net reduction in previously reported earnings of $204.0 million.


                                       6
<PAGE>




The impact of the correction to the basis of the mortgage servicing rights three
months ended March 31, 2001, as set forth herein, is as follows:

Mortgage Servicing Rights Restatement
For the Three Months Ended March 31, 2001
(Dollars in millions)

<TABLE>
                                                        Mortgage servicing       Restatement adjustments        Restated mortgage
                                                            rights as             to mortgage servicing         servicing rights
                                                       originally reported                rights
                                                               (1)
                                                       ----------------------------------------------------------------------------
<S>                                                       <C>                             <C>                      <C>
Restated Beginning Balance at December 31, 2000           $  4,156.5                      $     -                  $  4,156.5
Additions                                                      297.4                            -                       297.4
Change in value due to hedged risk                            (217.2)                        217.2                         -
Amortization                                                  (135.4)                           -                      (135.4)
Valuation provision                                             (5.5)                       (272.0)                    (277.5)
                                                       ----------------------------------------------------------------------------
Ending Balance at March 31, 2001                          $  4,095.8                      $  (54.8)                $  4,041.0
                                                       ============================================================================

<FN>
(1)  Ending  Balance  at March  31,  2001 is  modified  in  accordance  with the
     Restated Beginning Balance at December 31, 2000. Refer to Form 10-Q/A filed
     for the quarterly period ended December 31, 2000 for additional information
     regarding the Restated Beginning Balance at December 31, 2000.
</FN>
</TABLE>



3.  CASH AND CASH EQUIVALENTS

Cash and cash  equivalents  include  cash on hand  and cash due from  banks  and
interest-bearing  deposits  with an original  maturity of three  months or less.
Margin  deposits  associated  with  the risk  management  program  for  mortgage
servicing  rights  are  maintained  with   counterparties  and  the  Company  in
accordance with the requirements of  International  Swap Dealer  Agreements.  At
March  31,  2001   counterparty  net  margin  deposits  with  the  Company  were
approximately  $94.7  million.  At September 30, 2000,  the Company's net margin
deposits with counterparties totaled approximately $84.0 million


4.  MORTGAGE SERVICING RIGHTS (Restated)

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

Balance, September 30, 2000                    $4,464,312
Additions                                         734,787
Amortization                                     (255,654)
Valuation provision                              (902,371)
                                          -----------------

Balance, March 31, 2001                        $4,041,074
                                          =================


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

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

In June of 1998, the Financial  Accounting  Standards Board issued  Statement of
Financial Accounting  Standards No. 133, "Accounting for Derivative  Instruments
and Hedging  Activities"  (SFAS 133).  SFAS 133,  as amended,  standardizes  the
accounting for derivative  instruments and hedging  activities and requires that
all  derivative  instruments  be  recognized as assets and  liabilities  at fair
value. If certain  conditions are met, "hedge accounting" may be applied and the
derivative  instruments  may be  specifically  designated as: (a) a hedge of the


                                       7
<PAGE>

exposure to changes in the fair value of a  recognized  asset or liability or an
unrecognized firm commitment  ("fair value hedge"),  (b) a hedge of the exposure
to  variability  of cash flows of a recognized  asset,  liability or  forecasted
transaction  ("cash  flow  hedge")  or (c) a hedge of certain  foreign  currency
exposures. In the case of a qualifying fair value hedge, changes in the value of
the  derivative  instruments  that have been highly  effective are recognized in
current earnings along with the change in value of the designated hedge item. In
the case of a qualifying cash flow hedge, changes in the value of the derivative
instruments   that  have  been  highly   effective   are   recognized  in  other
comprehensive income ("OCI"),  until such time that earnings are affected by the
cash flows of the underlying hedged item. In either a fair value hedge or a cash
flow hedge,  net earnings are impacted to the extent the changes in the value of
the derivative  instruments do not perfectly  offset the changes in the value of
the hedge items (so called  "ineffectiveness").  Derivative instruments that are
non-designated  or do not  meet  the  relevant  hedge  accounting  criteria  are
accounted for at fair value with gains and losses recorded to current  earnings.
The Company is not a party to any foreign currency hedge relationships.

Effective with its first fiscal quarter  beginning  October 1, 2000, the Company
adopted  SFAS 133 as  required.  Accordingly,  all  derivative  instruments  are
recognized  on balance  sheet at fair value and are  either  designated  as fair
value hedges, cash flow hedges, or are non-designated  pursuant to the Company's
risk  management  policies.  At  October  1,  2000,  the  Company  recognized  a
cumulative-effect  transition  adjustment  of $1.4  million to increase  pre-tax
income for the effect of the change in accounting principle.  Additionally,  the
Company recognized a pre-tax  cumulative-effect  transition adjustment to reduce
OCI by $14.4 million. The transition adjustments are more fully explained in the
following  sections  along  with  the  risk  management   activities  and  hedge
accounting results for the three months and six months ended March 31, 2001. The
impact of the accounting for risk management  activities pursuant to SFAS 133 is
expected to create a level of ongoing volatility in reported financial results.

Risk Management of Loan Production Activities

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

Mortgage Pipeline

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

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


                                       8
<PAGE>


Following is a summary of the net  gains/(losses)  recognized on  non-designated
risk  management  derivatives  related  to the  pipeline  at March 31,  2001 (in
thousands):

<TABLE>

                                                                        For the three       For the six
                                                                        months ended        months ended
                                                                        March 31, 2001     March 31, 2001
                                                                       -----------------------------------
<S>                                                                     <C>                  <C>
Gains on IRLCs recognized to income                                     $   16,184           $   33,876

Losses on mortgage forward delivery contracts                               (9,549)             (23,367)
Losses on options contracts                                                 (1,125)              (2,671)
                                                                       -----------------------------------
   Total losses recognized to income                                       (10,674)             (26,038)

Net gains recognized on non-designated derivatives                      $    5,510           $    7,838
                                                                       ===================================
</TABLE>


Gains on interest rate lock commitments  represent increases in the value of the
commitments  from the  rate-lock  inception  date to the loan  funding date (for
those  commitments that are funded),  or to the current reporting date for those
IRLCs  that are open at  March  31,  2001.  The  basis of the  IRLCs at the loan
funding date,  representing cumulative gains or losses on the IRLCs, is included
as a  component  of the  initial  cost  basis of the loans.  Approximately  $7.7
million of the gains  recognized  on IRLCs  (reported for the three months ended
March 31, 2001, above) were applied to the initial basis of the underlying loans
funded and are included in the  carrying  amount of loans held for sale at March
31, 2001.  The balance of the gains totaling $8.5 million are recognized as open
derivative  contracts  at March 31,  2001 and are  recorded at fair value in the
consolidated  balance sheets.  The net gains and losses on  non-designated  risk
management derivatives (related to the pipeline) were included as a component of
risk management  results in the previously filed Form 10-Q for the quarter ended
March 31, 2001. To present an integrated operational perspective,  these results
were  reclassified and are now included in net mortgage  origination  revenue in
the accompanying consolidated statements of income.

Mortgage Inventory

The Company's  mortgage inventory includes closed loans that are held for resale
pending  completion  of  normal   post-closing   review,   collateral   document
preparation  and other pooling  requirements  necessary to  consummate  the sale
and/or  securitization.  Based  on the  status  of such,  as well as  historical
delivery patterns and investor settlement dates, the Company is able to forecast
the  amount  and  timing  of loan  sales.  Approximately  $1.50  billion  of the
Company's  loans  at March  31,  2001  are  conforming  loans  which  have  been
underwritten  pursuant to the requirements of the secondary  marketing  agencies
(FNMA,  FHLMC or GNMA as  appropriate).  The Company's risk  management  program
involves  the use of mortgage  forward  delivery  contracts to hedge 100% of its
agency-eligible  conforming loans as forecasted loan sales. At March 31, 2001, a
total of $1.50 billion of mortgage forward delivery contracts were designated as
cash flow hedges. At the inception of the hedge, the Company formally  documents
the relationship  between the forward delivery contracts and the forecasted loan
sales as well as its risk management  objective and strategy for undertaking the
hedge  transactions.  The dollar amount of the forward delivery  contracts along
with the  underlying  rate and  terms of the  contracts  are  equivalent  to the
forecasted  loan  sales that are  probable  of  occurring.  Hence,  the  forward
delivery  contracts   effectively  fix  the  forward  sales  price  and  thereby
substantially   eliminate  interest  rate  and  pricing  risk  to  the  Company.
Cumulative losses related to the hedge instruments in the amount of $0.9 million
were  recorded  in OCI at March 31,  2001 and will be  reclassified  to earnings
during the next 90 days,  concurrent  with the  recognition  in  earnings of the
changes in cash flows of the  forecasted  loan sales.  Pursuant to SFAS 133, the
unrealized gains  (representing the expected offset from the variability in cash
flows)  associated  with the  forecasted  loan  sales  are not  recorded  in the
consolidated  balance sheet at March 31, 2001 but are represented as a component
of the fair value of loans held for sale in excess of their carrying value.

Mortgage  loans held for sale at March 31,  2001  include  non-conforming  loans
aggregating $112.4 million which will be sold to non-agency,  private investors.
During the three- and six-month periods ended March 31, 2001,  gains/(losses) of
$0.2  million  and $(0.2)  million,  respectively,  on  non-designated  mortgage
forward delivery contracts maintained as economic hedges of non-conforming loans
were recorded to earnings and included as a component of risk management results
in the  previously  filed Form 10-Q for the  quarter  ended March 31,  2001.  To
present an integrated operational  perspective,  these results were reclassified
and are now included in net  mortgage  origination  revenue in the  accompanying
consolidated statements of income.


                                       9
<PAGE>


The fair values of risk management  hedging  relationships at March 31, 2001 are
as follows (in thousands):

Mortgage Pipeline:
IRLCs at period end                                                $      8,521
Non-designated mortgage forward delivery contracts                       (9,548)
Options on mortgage-backed securities                                     1,671
                                                           ---------------------
 Total fair value of pipeline derivatives                                   644

Mortgage Inventory:
Designated mortgage forward delivery contracts                             (869)
Non-designated mortgage forward delivery contracts                         (214)
                                                           ---------------------
 Total fair value of derivatives related to inventor y                   (1,083)

Net liability recorded for fair value derivatives                  $       (439)
                                                           =====================

Carrying value of mortgage loans held for sale                     $  1,614,909
Fair value of loans held for sale                                     1,618,779
                                                           ---------------------
 Unrealized gains in mortgage inventory                            $      3,870
                                                           =====================


Transition Adjustments and Current Period Activity in OCI

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

The  pre-tax  cumulative-effect  transition  adjustment  to reduce  OCI by $14.4
million  relates solely to the hedging  activities of the mortgage  inventory at
October 1, 2000. Specifically,  this amount represents the cumulative losses (to
September 30, 2000) of mortgage forward delivery contracts that were off-balance
sheet prior to the adoption of SFAS 133. Such  cumulative  losses did not exceed
cumulative  unrealized gains in the designated  mortgage inventory at October 1,
2000.  Pursuant to the  requirements  of SFAS 133,  cumulative  losses in OCI of
$14.3 million were  reclassified to earnings  during the six-month  period ended
March 31,  2001,  concurrent  with the  recognition  of the gains (or  favorable
variability  in cash  flows) of the  related  forecasted  loan  sales  that were
settled.  Gains and  losses  on such  hedge  relationships  related  to  settled
transactions are included as a component of net mortgage  origination revenue in
the accompanying  consolidated  statements of income. Activity in OCI related to
cash flow hedges of  forecasted  loan sales is summarized as follows for the six
months ended March 31, 2001 (in thousands):

<TABLE>

                                                                                                          Tax
                                                                                     Before-tax        (expense)       Net-of-tax
                                                                                       Amount         or benefit         Amount
                                                                                ---------------------------------------------------
<S>                                                                                  <C>               <C>               <C>
Balance at September 30, 2000                                                        $     -           $     -          $    -
Cumulative effect of a change in accounting for hedging activities                    (14,383)            5,250          (9,133)
Net losses on current period cash flow hedge                                           (4,589)            1,674          (2,915)
Reclassification of  losses to net income                                              14,302            (5,220)          9,082
                                                                                ---------------------------------------------------

Balance at December 31, 2000                                                         $ (4,670)         $  1,704         $(2,966)
Net gains on current period cash flow hedge                                             3,742            (1,366)          2,376
Reclassification of net losses to net income                                               59               (21)             38
                                                                                ---------------------------------------------------

Balance at March 31, 2001                                                            $   (869)         $    317         $  (552)
                                                                                ==================================================

</TABLE>



Risk Management of Mortgage Servicing Rights

HomeSide utilizes a number of risk management  derivative  instruments to manage
the interest  rate risk  associated  with its mortgage  servicing  rights.  Such
instruments  include interest rate swaps,  swaptions and caps,  mortgage forward
delivery  contracts,  options on  mortgage-backed  securities,  and  options and


                                       10
<PAGE>

futures on exchange traded Treasury and Eurodollar  contracts.  Given the unique
value determinants and convexity of mortgage servicing rights, management uses a
combination  of derivative  instruments  to construct a hedge  portfolio that is
intended to provide effective  protection of the value of the Company's mortgage
servicing rights from interest rate risk.

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

The Company employs statistical correlation techniques, both at the inception of
the hedge period and on an ongoing  basis,  to formally  assess its  expectation
that changes in the value of the derivative contracts are effectively correlated
to changes in the value of the hedged  asset or  liability.  Due to an incorrect
interest rate assumption in the mortgage  servicing  rights valuation model (see
Note 2), the Company  determined that the inception  documentation  required for
hedge  accounting  pursuant to SFAS 133 for the quarter ended March 31, 2001 was
inadequate to support the characteristics of the hedged item and its exposure to
changes in hedged risk. Therefore, the Company concluded that the application of
hedge accounting was inappropriate for those derivative  instruments  previously
designed  to hedge the  exposure  to changes  in the fair value of the  mortgage
servicing  rights  assets.  The Company  recognized a gain of $264.2  million to
current  earnings  related to the change in fair value of these  derivatives for
the three months ended March 31, 2001,  and a gain of $634.6 million for the six
months ended March 31, 2001, with no corresponding  hedge offset relative to the
change in the fair value of the mortgage  servicing rights asset.  Consequently,
the  Company  reversed a  previously  recorded  change in value of the  mortgage
servicing  rights due to hedged risk of $217.2  million to current  earnings for
the three  months ended March 31,  2001,  and $565.1  million for the six months
ended March 31, 2001 and recorded an  additional  valuation  provision of $272.0
million and $886.4  million,  related to an  impairment  evaluation  of mortgage
servicing  rights for the three months ended March 31, 2001 and six months ended
March 31, 2001, respectively.

HomeSide's  risk  management  program  also  employs  the use of  non-designated
derivative contracts that are used to provide a level of economic offset against
the value changes  attributable  to the  non-designated  portfolios  that do not
qualify for hedge accounting treatment under SFAS 133. Additionally, the Company
is party to certain risk  management  strategies that are structured to mitigate
yield  curve  risk and to provide a level of  economic  offset to the time decay
(theta).  These non-designated  derivatives are marked-to-market with changes in
value  recorded to  earnings.  During the three  months ended March 31, 2001 the
company  recognized a loss of $65.8 million to current  earnings  related to the
change  in fair  value of  these  non-designated  derivatives  and a loss in the
amount of $55.8 million associated with excluded  components  relating to theta.
During the six months  ended  March 31, 2001 the  company  recognized  a loss of
$40.3 million to current  earnings  related to the change in fair value of these
non-designated  derivatives and a loss in the amount of $86.2 million associated
with the excluded components relating to theta. Additionally,  the fair value of
the Company's  derivative  instruments  used in the risk  management of mortgage
servicing rights is $236.2 million at March 31, 2001.

Risk Management of Corporate Funding

To meet its funding  requirements,  the Company  periodically issues fixed-rate,
medium-term  notes  which are  converted  to  floating-rate  debt as part of its
Corporate funding strategies.  As of the three months and six months ended March
31, 2001, the Company had $750 million of fixed-rate, medium-term notes that had
been  swapped to  floating  rates of  interest  with $750  million  in  notional
interest rate swaps.  The Company has designated the interest rate swaps as fair
value  hedges  of the  change  in value of the  medium-term  notes  due to LIBOR
interest rates. At the inception of the hedge,  the Company  formally  documents
the hedging relationships between the hedge instruments and the hedged items, as
well as the risk  management  objectives and strategy for  undertaking the hedge
transactions.  The medium-term notes are not prepayable and the key terms of the
interest  rate  swaps  are  equivalent  to  those  of  the  medium-term   notes.
Accordingly,  the Company expects that changes in the value of the interest rate
swaps will offset the changes in the value of the fixed-rate  debt  attributable
to LIBOR interest rates.  During the three months and six months ended March 31,
2001, the value of the interest rate swap  contracts  increased by $11.8 million
and $25.2 million, respectively, and offset the changes in the fair value of the
medium-term  notes due to the hedge risk.  The fair value of interest  rate swap
contracts designated as fair value hedges of medium-term notes was $25.0 million
at March 31, 2001.

Termination of Hedging Relationships

The Company employs a number of risk management  monitoring procedures to ensure
that the designated hedging relationships are demonstrating, and are expected to
continue to  demonstrate,  a high level of  effectiveness.  Hedge  accounting is
discontinued  on a  prospective  basis  if it is  determined  that  the  hedging
relationship  is no longer  effective or expected to be effective in  offsetting
changes in the fair value or cash flows of the hedge  item,  or if a  forecasted
transaction  is no longer  probable  of  occurring.  When  hedge  accounting  is
discontinued,  the Company continues to carry the derivative instruments at fair
value with changes in their value recorded to earnings.  However, in the case of


                                       11
<PAGE>

a fair value hedge that is  discontinued,  the carrying amount of the previously
hedged asset or  liability  may not be adjusted for changes in their fair value,
except in the case  where a decline  in fair  value  creates  impairment  to the
Company. In the case of a cash flow hedge of a forecasted transaction that is no
longer probable of occurring,  gains and losses that were previously accumulated
in other comprehensive income are immediately recognized to earnings. During the
three months and six months ended March 31, 2001, no hedging  relationships were
terminated.

Fair Value of Derivative Instruments

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

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

Other  Derivatives:  The Company uses certain  derivatives to economically hedge
the funding activities associated with government loans that are repurchased out
of GNMA (Government  National Mortgage  Association)  pools that the Company has
previously sold. However,  the Company does not designate a hedging relationship
for these derivatives for hedge accounting purposes.  Accordingly, net losses on
these  derivatives of $0.4 million and $0.7 million for the three months and six
months ended March 31, 2001, respectively,  were recorded to income and included
as a component of risk management  results in the previously filed Form 10-Q for
the  quarter  ended  March  31,  2001.  To  present  an  integrated  operational
perspective, these results were reclassified and are now included as a component
of other income in the accompanying consolidated statements of income.


6.  NOTES PAYABLE

Notes payable consist of the following (in thousands):

<TABLE>
                                                                               Weighted Average Interest Rate
                                                                               ------------------------------
                                                    Total Outstanding       At Period End       During the Period
                                                    -----------------       -------------       -----------------
<S>                                                    <C>                      <C>                   <C>
March 31, 2001:
Commercial paper                                       $1,500,000               5.40%                 5.84%
National Australia Bank unsecured facility              1,834,500               5.41%                 6.00%
                                                    -----------------
  Total                                                $3,334,500
                                                    =================

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

</TABLE>


HomeSide  Lending,  the  Company's   wholly-owned   operating  subsidiary,   has
established  a commercial  paper  program  which is supported by an  independent
syndicate of banks under a credit  facility.  On March 19, 2001 this  commercial
paper  program was  increased  from $1.5 billion to $2.0  billion.  The weighted
average  interest rates on commercial  paper  outstanding  during the three- and
six-month  periods ended March 31, 2001 were 5.84% and 6.24%,  respectively.  On
October 16, 2000,  HomeSide  Lending  entered into a $1.5 billion back-up credit
facility.  This  agreement  replaces  HomeSide  Lending's  previous  bank credit
facility and will  terminate on October 15,  2002.  Borrowings  under the credit
facility  bear  interest  at rates per annum,  based on, at  HomeSide  Lending's
option, (i) the Eurodollar rate plus an applicable  margin,  (ii) the greater of
the federal funds rate plus an applicable margin or the prime rate, (iii) in the
case of swingline  loans, the federal funds rate plus an applicable  margin,  or
(iv) in the case of competitive bid loans, the lowest competitive  Eurodollar or
fixed rate  submitted by a bidding  lender.  The primary  purpose of this credit
facility  is to  provide  liquidity  back-up  for  HomeSide's  commercial  paper
program. The outstanding commercial paper reduces available borrowings under the
credit facility.  At March 31, 2001, there were no amounts outstanding under the
credit facility.


                                       12
<PAGE>

HomeSide  Lending's  unsecured  revolving  credit  facility  with  the  National
provides short-term funding up to $2.5 billion, subject to limits imposed by the
National's regulatory authorities. As of March 31, 2001, the National's limit to
lend funds to HomeSide Lending,  a non-bank  affiliate,  was approximately  $2.0
billion. Borrowings under the credit facility may be overnight or for periods of
7,30,60 or 90 days. For overnight borrowings, the interest rate is determined by
the National at the time of the  borrowing.  For LIBOR - based  borrowings,  the
interest rate is charged at the  corresponding  LIBOR rate. The weighted average
interest rate on outstanding  borrowings  under this credit  facility during the
three-  and  six-month  periods  ended  March  31,  2001 were  6.00% and  6.35%,
respectively.


7.  LONG-TERM DEBT

Medium-term notes

Effective  February 16, 2001,  HomeSide  Lending  registered an additional  $1.0
billion  in  medium-term  notes  under a  registration  statement  on  Form  S-3
(Registration   Number   333-54684)  filed  with  the  Securities  and  Exchange
Commission.  This effectively  raised the medium-term note shelf registration to
$3.568 billion.  As of March 31, 2001,  outstanding  medium-term notes issued by
HomeSide  Lending under this shelf  registration  statement  were as follows (in
thousands):

<TABLE>
    Issue Date               Outstanding Balance          Coupon Rate              Maturity Date
    ----------               -------------------          -----------              -------------
<S>                              <C>                          <C>                 <C>
June 30, 1997                    $  200,000                   6.88%               June 30, 2002
June 30, 1997                        40,000                   6.82%               July 2, 2001
July 1, 1997                         15,000                   6.86%               July 2, 2001
July 31, 1997                       200,000                   6.75%               August 1, 2004
September 15, 1997                   45,000                   6.77%               September 17, 2001
April 23, 1998                      125,000                   5.79% *             April 24, 2001
May 22, 1998                        225,000                   6.20%               May 15, 2003
June 9, 2000                        215,000                   7.07% *             June 10, 2002
June 9, 2000                        200,000                   6.89% *             April 9, 2002
June 9, 2000                         85,000                   7.07% *             June 10, 2002
August 1, 2000                       75,000                   6.97% *             August 1, 2002
September 14, 2000                   75,000                   6.79% *             September 16, 2002
September 14, 2000                   60,000                   6.94% *             September 15, 2003
September 14, 2000                   25,000                   7.00%               September 16, 2002
September 15, 2000                  100,000                   6.79% *             September 16, 2002
September 15, 2000                   50,000                   6.86% *             September 16, 2002
December 4, 2000                    125,000                   6.98% *             December 4, 2002
December 4, 2000                     75,000                   6.98% *             December 4, 2002
December 4, 2000                     50,000                   6.87% *             December 4, 2002
                             --------------------
  Total                          $1,985,000
                             ====================
</TABLE>


* Represents initial interest rate for floating rate note

As of March 31,  2001,  the  outstanding  fixed rate  medium-term  notes of $750
million had been  effectively  converted  by interest  rate swap  agreements  to
floating-rate  notes.  During the three  months and six months  ended  March 31,
2001, the value of the interest rate swap  contracts  increased by $11.8 million
and $25.2 million, respectively, and offset the changes in the fair value of the
medium-term  notes due to the hedge risk.  The fair value of interest  rate swap
contracts designated as fair value hedges of medium-term notes was $25.0 million
at  March  31,  2001.  See  note 5.  The  weighted  average  borrowing  rates on
medium-term  borrowings  issued for the three- and six-month periods ended March
31, 2001, including the effect of the interest rate swap agreements,  were 6.22%
and 6.58%, respectively.  Net proceeds from the issuances were primarily used to
reduce  the  amounts  outstanding  under  the  bank  credit  agreement,  acquire
servicing rights, and fund loan originations.

Mortgage note payable

In connection with the acquisition of BancBoston Mortgage Corporation,  HomeSide
Lending  assumed a mortgage note payable that is due in 2017 and bears  interest
at a stated rate of 9.5%.  HomeSide Lending's main office building is pledged as
collateral for the mortgage note payable. The balance of the mortgage payable at
March 31, 2001,  including the fair value adjustments  resulting from the merger
with the National, was $22.1 million.


                                       13
<PAGE>


11.25% Notes and Subsequent event

The Company issued $200.0 million of 11.25% notes (the "Notes")  pursuant to the
terms of that certain Indenture dated as of May 14, 1996 (the "Indenture").  The
Notes mature on May 15, 2003, and pay interest semiannually in arrears on May 15
and  November  15 of each year.  The Notes are  redeemable  at the option of the
Company,  in whole or in part,  at any time on or after May 15, 2001, at certain
fixed  redemption  prices.  On April 16,  2001 the Company  issued a  redemption
notice in accordance with the provisions of the Indenture  notifying the holders
of the Notes that it would redeem them on May 16, 2001 at the  redemption  price
set forth in the Notes.  The  redemption  of the Notes is not expected to have a
material effect on the  consolidated  financial  statements of the Company.  The
Notes are  secured  by a pledge of the common  stock of  HomeSide  Lending,  the
Company's  wholly-owned  subsidiary.  The  Company  is in  compliance  with  all
requirements  included  in the  Indenture.  The  Company  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, 2001 was $130.0  million.  The balance of the Parent Notes at March
31, 2001, including the fair value adjustment resulting from the merger with the
National, was $139.5 million.


8.  EXECUTIVE COMPENSATION

Effective  March 20, 2001, the Company adopted certain changes to its previously
adopted NAB Group - USA Deferred Compensation Plan, effective as of February 10,
1998 (the  "Plan").  The Plan is for the  benefit  of certain  employees  of the
Company's  subsidiary,  HomeSide Lending,  Inc., all of whom constitute a select
group of management or highly compensated employees  ("Participants").  Pursuant
to the  provisions  of Section  2.16 of the Plan,  HomeSide  Lending,  Inc.  was
designated a Participating Employer.

The  purpose of the Plan is to provide  participants  the  opportunity  to defer
receipt of salary,  bonus,  and other specified cash  compensation.  The Plan is
intended  to  benefit  a  "select  group of  management  or  highly  compensated
employees"  within the  meaning of  Sections  201,  301 and 401 of the  Employee
Retirement  Income  Security  Act  of  1974,  as  amended  ("ERISA"),  and to be
therefore exempt from the requirements of Parts 2, 3 and 4 of Title I of ERISA.

The changes adopted as of March 20, 2001 may be summarized as follows:

Key Elements of Amended Plan
----------------------------

Interim  Distributions  Now  Permitted:  Deferral  payments can now be paid on a
specified Interim Distribution Date while still employed. A Participant may have
up to three Interim Distribution Dates. Any Interim Distribution Dates scheduled
after  the  actual  termination  of  employment  will be paid in a lump sum upon
termination.  Previously,  deferral payments were made only after termination of
employment.

Amount of Interim Distribution:  A Participant may establish a maximum amount to
be paid on the Interim  Distribution Date. Any excess due to investment build-up
will be swept to the Termination  Benefit.  This is a new feature not previously
available under the Plan.

Greater  Flexibility  in  Termination  Benefit  Installment  Payments:  There is
increased  flexibility in administering  the installment  payment method for the
Termination Benefit.  Rather than requiring equal installments,  the Participant
may  now  elect  up to  three  varying  lump  installments  with  the  remaining
installments  being  equal in amount.  Previously,  there were only two  benefit
payment options.

Greater  Flexibility in Changing the Termination  Benefit payment election:  The
prior 54th  birthday  requirement  for  changing  the form of  payment  has been
eliminated. The payment form elected (lump or installment) may now be changed at
any time as long as the  requested  change  takes place at least  twelve  months
before employment termination.

Change of Control:  There is no longer an automatic lump sum payout in the event
of a Change of Control.  Payments  will be  accelerated  to a lump sum only if a
Participant  is  involuntarily  terminated  without  cause  within  three  years
following a Change of Control. Otherwise,  payments will be made as scheduled by
Participant.

One Form of Payment for the Termination Benefit: In order to ease administration
of the Plan, future  Termination  Benefit deferrals must follow a single payment
regime (for instance,  no lump sum payment on one deferral and  installments  on
another  as  previously  permitted).  If the  Participant  has  already  elected
multiple  payout  methods in earlier  deferrals,  he may  retain  those  varying
payment schedules only for those deferrals unless he voluntarily waives them.


                                       14
<PAGE>

The  foregoing  is only a summary  of the key  changes  to the Plan.  There were
additional  minor changes to the Plan not summarized  here. The complete text of
the revised  Plan is filed as an exhibit  hereto and should be referred to for a
complete  understanding of the changes.  Capitalized terms used in the foregoing
summary are defined in the Plan.


9.  NEW ACCOUNTING STANDARDS

In September 2000, the Financial  Accounting Standards Board issued Statement of
Financial  Accounting Standards No. 140, "Accounting for Transfers and Servicing
of  Financial  Assets and  Extinguishments  of  Liabilities"  ("SFAS 140") which
replaces  Statement No. 125. This statement  revises the standards of accounting
for securitizations and other transfers of financial assets and collateral along
with  requiring  certain  disclosures.  This  statement  is  effective  for  the
transfers and servicing of financial assets and  extinguishments  of liabilities
occurring   after  March  31,  2001.  It  is  effective  for   recognition   and
reclassification  of collateral for fiscal years ending after December 15, 2000.
Management  does  not  expect  the  requirements  of  this  standard  to  have a
significant impact on the financial statements.


10. DIVIDENDS

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


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

General

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

HomeSide's  strategy  emphasizes  variable cost mortgage  origination,  low cost
servicing,  and  effective  risk  management.   Headquartered  in  Jacksonville,
Florida,  HomeSide  ranks as the 10th  largest  originator  and the 6th  largest
servicer in the United  States at March 31,  2001,  based on data  published  by
Inside Mortgage Finance.

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

Operating  results for the three- and six-month periods ended March 31, 2001 and
2000 are not necessarily  indicative of the results that may be expected for the
fiscal year ending  September 30, 2001.  For further  information,  refer to the
consolidated  financial  statements and footnotes  thereto  included in the Form
10-K for the fiscal year ended  September  30,  2000 of HomeSide  International,
Inc.

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


                                       15
<PAGE>

loans  and the  value of the  Company's  servicing  portfolio.  These  risks and
uncertainties  are  more  fully  detailed  in the  Company's  filings  with  the
Securities and Exchange Commission.

Loan Production Activities

HomeSide  participates  in several  origination  channels,  including  wholesale
origination  (correspondent,   co-issue,  and  broker)  and  direct  origination
channels. The direct channels include internet, telemarketing,  direct mail, and
mortgages related to affinity group and co-branding partnerships.  HomeSide also
purchases servicing rights in bulk from time to time.  HomeSide's strategy is to
customarily  sell all loans that it originates or purchases  while retaining the
servicing  rights to such loans.  This  multi-channel  production  base provides
access to and flexibility among production  channels in a wide variety of market
and economic conditions. By focusing on production channels with a variable cost
structure,  HomeSide  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-month  periods  ended March 31, 2001
and 2000 (in millions):

<TABLE>
                                For the Three        For the Three       For the Six         For the Six
                                Months Ended         Months Ended        Months Ended        Months Ended
                               March 31, 2001       March 31, 2000      March 31, 2001      March 31, 2000
                              ------------------    ----------------    ---------------     ---------------

<S>                               <C>                 <C>                   <C>                 <C>
Correspondent                     $ 3,421             $ 1,717               $ 6,195             $ 4,279
Co-issue                            4,381               1,642                 7,531               4,072
Broker                              1,058                 343                 1,780                 812
                              ------------------    ----------------    ---------------     ---------------
  Total wholesale                   8,860               3,702                15,506               9,163
Direct                                275                 129                   506                 276
                              ------------------    ----------------    ---------------     ---------------
  Total production                  9,135               3,831                16,012               9,439
Bulk acquisitions                   2,064               2,466                15,261               7,024
                              ------------------    ----------------    ---------------     ---------------
  Total production and
    acquisitions                  $11,199             $ 6,297               $31,273             $16,463
                              ==================    ================    ===============     ===============

</TABLE>


Total loan  production,  excluding bulk  acquisitions,  was $9.1 billion for the
three months ended March 31, 2001  compared to $3.8 billion for the three months
ended March 31, 2000, a 139% increase. Loan production was $16.0 billion for the
six months  ended  March 31, 2001  compared  to $9.4  billion for the six months
ended March 31, 2000, a 70% increase.  The increase was a function of HomeSide's
ability  to  leverage  origination  alliances,  technological  enhancements  and
influences from a more favorable interest rate environment.  When interest rates
decline, the size of the mortgage origination market increases as home ownership
becomes more affordable and as existing  mortgagors  refinance their loans.  For
the three-and six-month  periods  ended March 31, 2001,  refinances were 52% and
41%,  respectively,  of HomeSide's  production volume,  compared to 22% and 21%,
respectively, for the three-and six-month periods ended March 31, 2000.

Economies of scale are vital to the  long-term  viability of mortgage  servicing
and are increasingly important to remain competitive in the industry. During the
quarter,   HomeSide  continued  to  pursue  growth  opportunities  through  bulk
acquisitions  of  mortgage  servicing  rights  and  expansion  of its  Preferred
Partnership program.  Preferred  partnerships generally include a bulk servicing
acquisition and an ongoing mortgage origination flow. HomeSide services loans on
a priority  basis on behalf of its  Preferred  Partners  and offers the customer
mortgage-related  products.  Preferred Partner relationships  contributed 20% of
HomeSide's  production volume for the six months ended March 31, 2001.  Homeside
completed bulk  acquisitions  totaling $2.1 billion and $15.3 billion during the
three-and-six-month  periods  ended  March  31,  2001,  respectively.   Homeside
completed  bulk  acquisitions  totaling $2.5 billion and $7.0 billion during the
three-and six-month periods ended March 31, 2000, respectively.

Servicing Portfolio

Based on certain industry servicing statistics, management asserts that HomeSide
is one of the most  efficient  mortgage  servicers in the industry  based on its
servicing  cost per loan and the  number of loans  serviced  per  employee.  The
servicing operation makes extensive use of state-of-the-art technology,  process
re-engineering and expense management.  With a portfolio size of $189.4 billion,
HomeSide services the loans of approximately 2.1 million  homeowners from across
the United States and is committed to protecting the associated asset value 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.


                                       16
<PAGE>

The  number  of loans  serviced  at March 31,  2001 was  2,107,171  compared  to
1,726,192  at March  31,  2000.  HomeSide's  strategy  is to grow  its  mortgage
servicing   portfolio  by   concentrating  on  variable  cost  loan  origination
strategies and selective portfolio  acquisitions,  and as a result, benefit from
improved  economies of scale. A key to HomeSide's  future growth is the capacity
provided by its proprietary  servicing software.  This system allows HomeSide to
double the number of loans  typically  serviced  on a single  system and is also
used by the National to service its growing loan portfolio.

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-month  periods ended March 31, 2001 and 2000 (in
millions):

<TABLE>
                                         For the Three         For the Three         For the Six        For the Six
                                         Months Ended          Months Ended         Months Ended        Months Ended
                                        March 31, 2001        March 31, 2000       March 31, 2001      March 31, 2000
                                       ------------------    ------------------    ----------------    ---------------
<S>                                        <C>                   <C>                 <C>                <C>
  Balance at beginning of
   Period                                  $ 187,552             $ 150,735           $ 173,310          $ 145,552
     Additions, net                           11,176                 6,227              31,229             16,384
     Scheduled amortization                    1,329                 1,045               2,525              2,083
     Prepayments                               7,784                 3,112              12,191              6,802
     Foreclosures                                207                   304                 415                550
                                       ------------------    ------------------    ----------------    ---------------
         Total reductions                      9,320                 4,461              15,131              9,435
                                       ------------------    ------------------    ----------------    ---------------
  Balance at end of period                 $ 189,408             $ 152,501           $ 189,408          $ 152,501
                                       ==================    ==================    ================    ===============

</TABLE>


Results of Operations (Restated)

For the three  months  ended March 31, 2001  compared to the three  months ended
March 31, 2000

Summary (Restated)

Restated net (loss) income was ($68.0)  million for the three months ended March
31, 2001,  compared to $18.3  million for the three months ended March 31, 2000.
The $86.3  million  decrease  is  primarily  due to the impact of the  valuation
provision for the mortgage  servicing  rights driven by the  acceleration of the
projected  prepayment speeds associated with declining  mortgage interest rates.
Restated total (expenses)  revenues for the three months ended March 31, 2001 of
($27.5) million  compared to total revenue of $93.2 million for the three months
ended March 31,  2000.  The $120.7  million  decrease was  primarily  due to the
impact of the valuation  provision for the mortgage  servicing rights.  Restated
net servicing  (expense) revenue resulted in a net expense of ($50.1) million, a
decrease of $133.1  million  compared  to net  revenue of $83.0  million for the
three months ended March 31, 2000.  This change was  primarily due to the impact
of the  valuation  provision  for the mortgage  servicing  rights.  Net interest
expense  increased to ($18.8) million for the three months ended March 31, 2001,
compared to ($12.9) million primarily due to the narrowing of the spread between
short-term  and  long-term  interest  rates and the  funding of higher  mortgage
servicing assets. Net mortgage  origination revenue increased from $21.9 million
for the three months ended March 31, 2000 to $39.6  million for the three months
ended March 31, 2001 due to declining  mortgage interest rates which resulted in
increased  production volume. Total expenses increased 26% as a result of higher
expenses  associated  with the increase in production  volumes and the servicing
portfolio.  Restated  income tax  expense for the three  months  ended March 31,
2001, decreased $49.8 million compared to the three months ended March 31, 2000,
primarily due to a net loss resulting from the impact of the valuation provision
of mortgage servicing rights.

Net Servicing (Expense) Revenue (Restated)

The Company  incurred a net  (expense)  of ($50.1)  million for the three months
ended  March 31, 2001  compared  to net  revenue of $83.0  million for the three
months ended March 31, 2000.  Net  servicing  (expense)  revenue is comprised of
mortgage  servicing  fees net of guaranty  fees,  ancillary  servicing  revenue,
amortization  and  valuation  provision of mortgage  servicing  rights,  and the
earnings impact of risk management of mortgage servicing rights.

Mortgage  servicing  fees  increased 19% to $220.3  million for the three months
ended March 31, 2001 compared to $185.6 million for the three months ended March
31, 2000,  primarily as a result of portfolio  growth.  The servicing  portfolio
increased  $36.9 billion to $189.4  billion at March 31, 2001 compared to $152.5
billion at March 31, 2000, a 24% increase. The portfolio growth is primarily due
to loan production and bulk acquisitions.  HomeSide's  weighted average interest
rate on the mortgage  loans in the  servicing  portfolio  was 7.60% and 7.48% at
March 31, 2001 and 2000,  respectively.  The weighted average servicing fee, net
of guaranty fees and including ancillary income, for the servicing portfolio was


                                       17
<PAGE>

47.0 basis  points for the three  months  ended March 31, 2001  compared to 49.1
basis points for the three months ended March 31, 2000.

Amortization  expense increased 32% to $135.4 million for the three months ended
March 31, 2001,  from $102.7  million for the three months ended March 31, 2000.
The  increase in  amortization  expense was  primarily  due to  acceleration  of
projected prepayment speeds associated with declining mortgage interest rates. A
decline  in  mortgage  interest  rates  results  in an  increase  in  prepayment
estimates used in calculating periodic  amortization  expense.  Because mortgage
servicing rights are amortized over the expected period of 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.

Restated  valuation  provision of mortgage  servicing rights of ($277.5) million
for the three months ended March 31, 2001 is primarily due to the  impairment of
the mortgage  servicing  rights as described in detail in the Risk Management of
Mortgage Servicing Rights below.

Restated risk management of mortgage  servicing  rights income of $142.6 million
is primarily  due to the $264.2  million gain on  derivatives  determined  to no
longer  qualify for hedge  accounting,  as described in detail in the section on
Risk Management of Mortgage Servicing Rights in note 5, "Risk Management and the
Accounting for Derivative Instruments and Hedging Activities".

Net Interest (Expense)

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

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

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

Net interest  expense  increased 46% from ($12.9) million to ($18.8) million for
the quarter  ended March 31, 2001  compared to the quarter ended March 31, 2000.
The increase in net  interest  expense was  primarily  due to a narrowing of the
spread between  short-term and long-term rates and an increase in net assets due
to higher production  volumes and servicing  portfolio  growth.  For the quarter
ended March 31, 2001,  average  mortgage  rates  declined 121 basis points while
average  short-term  LIBOR rates  declined 39 basis points,  thereby  tightening
spreads by 82 basis points. Although spreads began to widen during the last half
of March 2001 with the  decline in  short-term  rates,  average  spreads for the
quarter  ended  March 31,  2001 were 154 basis  points  versus an average of 236
basis points for the quarter ended March 31, 2000.

Net Mortgage Origination Revenue

Net mortgage  origination revenue is comprised of fees earned on the origination
of mortgage  loans,  fees charged to review loan  documents for  purchased  loan
production,  gains  and  losses  on the sale of  loans,  and  reclassified  risk
management hedge results. Net mortgage origination revenue was $39.6 million for
the three  months ended March 31, 2001  compared to $21.9  million for the three
months ended March 31, 2000.  The increase was  primarily  due to an increase in
production volumes resulting from the factors  previously  discussed in the loan
production activities section.

Other Income

Other income for the three months ended March 31, 2001 was $1.8 million compared
to $1.2  million for the three months  ended March 31,  2000.  This  increase is
primarily  due to  the  amortization  of  the  deferred  gain  resulting  from a
sale-leaseback  transaction involving HomeSide's facility in San Antonio,  Texas
entered into on October 2, 2000.  In  accordance  with SFAS 98  "Accounting  for
Leases",  HomeSide recognized an immediate gain of $4.5 million. In addition,  a
deferred gain of $7.3 million was recorded and is amortized over the life of the
lease.


                                       18
<PAGE>

Salaries and Employee Benefits

Salaries and employee  benefits  expense was $32.6  million for the three months
ended March 31, 2001  compared to $25.9 million for the three months ended March
31, 2000, a 26% increase.  The average number of full-time  equivalent employees
was 2,506 for the three  months  ended March 31, 2001  compared to 2,474 for the
three  months  ended  March  31,  2000.  The  increase  during  the  quarter  is
attributable  to higher  production  volumes  resulting  in higher  commissions,
incentives and an increase in temporary and overtime.

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, 2001 was $9.4  million  compared to $7.7 million for the
three months ended March 31,  2000,  a 22%  increase.  The increase is driven by
additional  leased space and  technology  related assets in support of growth in
the mortgage servicing portfolio.

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

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

The servicing losses on investor-owned  loans and  foreclosure-related  expenses
totaled $8.1 million for the three months ended March 31, 2001  compared to $7.4
million for the three months ended March 31,  2000.  The increase was  primarily
attributable  to an increase in  servicing  losses  related to the growth of the
servicing portfolio.

Included in the balance of accounts payable and accrued liabilities at March 31,
2001 is a reserve for  estimated  servicing  losses on  investor-owned  loans of
$16.7 million.  The reserve has been established for potential losses related to
the  mortgage  servicing  portfolio.  Increases  to the  reserve  are charged to
earnings as servicing losses on  investor-owned  loans. The reserve is decreased
for  actual  losses  incurred  related  to  the  mortgage  servicing  portfolio.
HomeSide's  historical loss experience on VA loans generally has been consistent
with  industry  experience.  Management  believes  that HomeSide has an adequate
level of  reserve  based on  servicing  volume,  portfolio  composition,  credit
quality and historical loss rates, as well as estimated future losses.

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

                        Servicing Portfolio Delinquencies
                             (percent by loan count)

<TABLE>

                                                                                   March 31, 2001          March 31, 2000
                                                                                 --------------------    -------------------
<S>                                                                                     <C>                    <C>
Servicing Portfolio Delinquencies, excluding bankruptcies (at end of period)
          30 days                                                                       2.60%                  2.23%
          60 days                                                                       0.52%                  0.48%
          90+ days                                                                      0.43%                  0.55%
                                                                                 --------------------    -------------------
               Total past due                                                           3.55%                  3.26%
                                                                                 ====================    ===================

          Foreclosures pending                                                          0.59%                  0.52%
                                                                                 ====================    ===================

</TABLE>


Other Expenses

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

Other  expenses  were $15.7  million for the three  months ended March 31, 2001,
compared  to $9.3  million for the three  months  ended  March 31,  2000,  a 69%
increase.  The increase is primarily driven by higher production  volumes and an
increase in prepayment activity.


                                       19
<PAGE>




Income Tax (Benefit) Expense (Restated)

HomeSide's  restated  income tax (benefit)  expense was ($34.1)  million for the
three months ended March 31, 2001 compared to $15.7 million for the three months
ended March 31, 2000. The effective income tax rates for the three-month periods
ended March 31, 2001 and 2000 were 33% and 46%,  respectively.  The  decrease in
the income tax (benefit) expense was due to a net loss resulting from the impact
of the valuation  provision of mortgage  servicing rights and income  recognized
from the change in value of the derivatives  determined to no longer qualify for
hedge accounting.


Results of Operations (Restated)

For the six months  ended March 31, 2001  compared to the six months ended March
31, 2000

Summary (Restated)

Restated net (loss)  income was ($222.8)  million for the six months ended March
31, 2001, compared to $36.5 million for the six months ended March 31, 2000. The
$259.3  million  decrease  is  primarily  due to  the  impact  of the  valuation
provision for the mortgage  servicing  rights driven by the  acceleration of the
projected  prepayment speeds associated with declining  mortgage interest rates.
Restated  total  (expenses)  revenues for the six months ended March 31, 2001 of
($189.7)  million compared to total revenue of $185.3 million for the six months
ended March 31,  2000.  The $375.0  million  decrease was  primarily  due to the
impact of the valuation  provision for the mortgage  servicing rights.  Restated
net servicing (expense) revenue resulted in a net expense of ($221.5) million, a
decrease of $378.1 million compared to net revenue of $156.6 million for the six
months ended March 31, 2000.  This change was primarily due to the impact of the
valuation  provision for the mortgage  servicing  rights.  Net interest  expense
increased to ($38.0)  million for the six months ended March 31, 2001,  compared
to ($12.3)  million for the six months ended March 31, 2000.  This 209% increase
resulted  primarily  from a  narrowing  of the  spread  between  short-term  and
long-term  interest  rates and the growth of  HomeSide's  assets.  Net  mortgage
origination  revenue  increased  60% for the six  months  ended  March 31,  2001
compared  to the six  months  ended  March 31,  2000 due to  declining  mortgage
interest rates, which resulted in increased production volume. Total expenses of
$152.5  million  for the six months  ended  March 31,  2001  compared  to $128.3
million for the six months  ended  March 31,  2000,  an  increase of 19%,  was a
result of higher expenses  associated  with the increase in production  volumes,
the growth of the servicing portfolio, and higher prepayment activity.  Restated
income tax expense for the six months  ended March 31,  2001,  decreased  $139.1
million compared to the six months ended March 31, 2000,  primarily due to a net
loss resulting from the impact of the valuation  provision of mortgage servicing
rights.

Net Servicing (Expense) Revenue (Restated)

The Company  incurred a net  (expense)  of  ($221.5)  million for the six months
ended  March 31,  2001  compared  to net  revenue of $156.6  million for the six
months ended March 31, 2000.  Net  servicing  (expense)  revenue is comprised of
mortgage  servicing  fees net of guaranty  fees,  ancillary  servicing  revenue,
amortization  and  valuation  provision of mortgage  servicing  rights,  and the
earnings impact of risk management of mortgage servicing rights.

Mortgage  servicing  fees were $428.5 million for the six months ended March 31,
2001  compared  to $356.8  million  for the six  months  ended  March 31,  2000,
primarily as a result of portfolio  growth.  The servicing  portfolio  increased
$36.9 billion to $189.4  billion at March 31, 2001 compared to $152.5 billion at
March 31, 2000, a 24% increase.  The  portfolio  growth is primarily due to loan
production and bulk acquisitions.  HomeSide's  weighted average interest rate on
the mortgage  loans in the servicing  portfolio was 7.60% and 7.48% at March 31,
2001 and 2000,  respectively.  The weighted  average  servicing  fee,  including
ancillary income, for the servicing  portfolio was 46.8 basis points for the six
months  ended  March 31, 2001  compared to 47.9 basis  points for the six months
ended March 31, 2000.

Amortization  expense was $255.7 million for the six months ended March 31, 2001
compared  to $200.2  million  for the six months  ended  March 31,  2000,  a 28%
increase.  The  increase  in  amortization  expense  was  primarily  due  to the
accelerated  projected  prepayment  speeds  associated  with declining  mortgage
interest rates. A decrease in mortgage  interest rates results in an increase in
prepayment estimates used in calculating periodic amortization expense.  Because
mortgage  servicing rights are amortized over the expected period of service fee
revenues,  an increase in mortgage  prepayment  activity  typically results in a
shorter estimated life of the mortgage servicing assets and, accordingly, higher
amortization expense.

Restated  valuation  provision of mortgage  servicing rights of ($902.4) million
for the six months ended March 31, 2001 is primarily  due to the  impairment  of
the mortgage  servicing  rights as described in detail in the Risk Management of
Mortgage Servicing Rights below.

Restated risk management of mortgage  servicing  rights income of $508.1 million
for the six months ended March 31, 2001 is primarily  due to the $634.6  million
gain on  derivatives  determined to no longer qualify for hedge  accounting,  as
described  in detail in the section on Risk  Management  of  Mortgage  Servicing


                                       20
<PAGE>

Rights in Note 5, "Risk Management and the Accounting for Derivative Instruments
and Hedging Activities".

Net Interest (Expense)

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

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

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

Net interest expense  increased 209% from ($12.3) million to ($38.0) million for
the six months  ended March 31, 2001  compared to the six months ended March 31,
2000.  The increase in net interest  expense was primarily due to a narrowing of
the spread between  short-term and long-term rates and an increase in net assets
due to higher production  volumes and servicing  portfolio  growth.  For the six
months ended March 31, 2001,  average  mortgage  rates  declined 70 basis points
while  average  short-term  LIBOR  rates  increased  23  basis  points,  thereby
tightening  spreads by 93 basis points.  Although  spreads began to widen during
the last  half of March  2001 with the  decrease  in  short-term-rates,  average
spreads for the six months ended March 31, 2001 were 130 basis points  versus an
average of 223 basis points for the six months ended March 31, 2000.

Net Mortgage Origination Revenue

Net mortgage  origination revenue is comprised of fees earned on the origination
of mortgage  loans,  fees charged to review loan  documents for  purchased  loan
production,  gains  and  losses  on the sale of  loans,  and  reclassified  risk
management hedge results. Net mortgage origination revenue was $62.2 million for
the six months ended March 31, 2001 compared to $38.9 million for the six months
ended  March  31,  2000.  The  increase  was  primarily  due to an  increase  in
production volumes resulting from the factors  previously  discussed in the loan
production activities section.

Other Income

Other income for the six months  ended March 31, 2001 was $7.6 million  compared
to $2.1 million for the six months ended March 31, 2000. This increase primarily
resulted from a sale-leaseback  transaction involving HomeSide's facility in San
Antonio,  Texas  entered  into on October 2, 2000.  In  accordance  with SFAS 98
"Accounting for Leases",  HomeSide recognized an immediate gain of $4.5 million.
In addition,  a deferred gain of $7.3 million was recorded and is amortized over
the life of the lease.

Salaries and Employee Benefits

Salaries  and  employee  benefits  expense was $62.5  million for the six months
ended March 31, 2001  compared to $55.7  million for the six months  ended March
31, 2000, a 12% increase.  The average number of full-time  equivalent employees
was 2,434 for the six months ended March 31, 2001  compared to 2,513 for the six
months ended March 31, 2000.

Occupancy and Equipment Expense

Occupancy and equipment expense primarily  includes rental expense,  repairs and
maintenance  costs,  certain  computer  software  expenses and  depreciation  of
HomeSide's  premises and equipment.  Occupancy and equipment expense for the six
months ended March 31, 2001 was $19.2 million  compared to $16.3 million for the
six months  ended March 31,  2000,  a 18%  increase.  The  increase is driven by
additional  leased space and  technology  related assets in support of growth in
the mortgage servicing portfolio.


                                       21
<PAGE>


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  $18.2 million for the six months ended March 31, 2001 compared to $15.8
million for the six months  ended March 31, 2000.  The  increase  was  primarily
attributable  to an increase in  servicing  losses  related to the growth of the
servicing portfolio.

Other Expenses

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

Other  expenses  were $35.0  million for the six months  ended  March 31,  2001,
compared  to $22.7  million  for the six  months  ended  March 31,  2000,  a 54%
increase.  The increase is primarily  due to an increase in expenses  associated
with higher production volumes and an increase in prepayment activity.

Income Tax (Benefit) Expense (Restated)

HomeSide's restated income tax (benefit) was ($118.6) million for the six months
ended March 31, 2001  compared to an expense of $20.6 million for the six months
ended March 31, 2000. The effective  income tax rates for the six-month  periods
ended  March 31,  2001 and March 31,  2000 were 35% and 36%,  respectively.  The
decrease in the income tax  (benefit)  expense  was due to a net loss  resulting
from the impact of the  valuation  provision  of mortgage  servicing  rights and
income  recognized from the change in value of the derivatives  determined to no
longer qualify for hedge accounting.

Risk Management Activities (Restated)

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

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

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

Risk Management of Market Risk

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

As more fully  discussed in the notes to the financial  statements,  the Company
adopted  SFAS No.  133,  "Accounting  for  Derivative  Instruments  and  Hedging
Activities", effective October 1, 2000. Accordingly, for the three month and six
month  periods  ended  March 31,  2001,  all of the  Company's  risk  management
derivative  instruments are recorded at fair value. Changes in the value of risk
management  derivatives  instruments designated as qualifying fair value hedging
relationships  are recognized in current  earnings along with the changes in the


                                       22
<PAGE>

value of the qualifying  hedged assets or  liabilities.  Changes in the value of
risk  management  derivative  instruments  designated  as  qualifying  cash flow
hedging relationships of forecasted loan sale transactions are recorded to other
comprehensive  income  ("OCI")  and  reclassified  to earnings  concurrent  with
settlement of the loan sale  transactions.  The accounting  policies relevant to
derivative instruments and hedging activities for each of the Company's key risk
management  areas  are  more  fully  discussed  in  note 5 to  the  consolidated
financial statements.

Market Environment

The market  environment  during the  three-months and six-months ended March 31,
2001 was extremely  volatile.  During the periods,  key interest rates along the
one- to  ten-year  sectors  of the  treasury  curve  declined,  on  average,  by
approximately 70 and 140 basis points, respectively.

Mortgage  rates  declined by 35 basis  points from 7.30% at December 31, 2000 to
6.95% at March 31, 2001 and 93 basis points from 7.88% at September  30, 2000 to
6.95% at March 31, 2001. Other key interest rates for the Company include 5- and
10-year swap rates which declined by 57 and 29 basis points for the three months
ended and 136 and 107 basis  points for the  six-months  ended  March 31,  2001,
respectively.

Overall,  interest rate spreads on mortgage  products were  extremely  volatile.
One-month  LIBOR was down 148 basis  points from 6.56% at  December  31, 2000 to
5.08% at March  31,  2001.  As a  result,  spreads  between  mortgage  rates and
one-month  LIBOR  widened  by  approximately  113 and 61  basis  points  for the
three-months and six-months ended March 31, 2001.  However,  average spreads for
the current  three-and  six-month periods remained well below average spreads of
the corresponding periods in the previous year.

Following is a summary of risk  management  activities and results for the three
months and six months ended March 31, 2001:

Risk Management of Loan Production Activities

The Company  maintains a risk management  program to protect and manage interest
rate risk and pricing risk associated with its mortgage  commitment pipeline and
mortgage  inventory.  In the normal  course of  business,  the  Company  extends
interest rate lock commitments ("IRLCs" or "commitments") to borrowers who apply
for loan funding and meet certain credit and underwriting criteria. IRLCs in the
mortgage  pipeline  expose the Company to interest  rate and pricing  risk. In a
rising rate environment,  the aggregate value of the Company's commitments tends
to decrease in value and,  generally,  at an  accelerating  rate. In a declining
rate  environment,  the value of the Company's  commitments tends to increase in
value.  However,  the rate of increase in the value tends to  decelerate  as the
likelihood of the borrower closing on the loan decreases if market rates decline
by a meaningful amount versus the borrower's committed rate. As part of its risk
management processes, the Company has devoted substantial resources and modeling
solutions to enable  management  to project the  expected  percent of IRLCs that
will  ultimately fund under  different  interest rate scenarios  (referred to as
"pull-through  rates"). The success of the Company's risk management  strategies
relies on proactive  analysis of historical  and projected  pull-through  rates.
However,  since borrower behavior cannot be perfectly  predicted and modeled, an
element of economic  ineffectiveness  can be expected in the Company's  pipeline
hedging relationships.

In the aggregate,  the Company's  strategy  involves the use of a combination of
mortgage  forward   delivery   commitments  and  mortgage  options  to  maintain
appropriate  risk management  coverage  related to IRLCs.  The Company  utilizes
mortgage forward delivery contracts to hedge a baseline portion of the Company's
pipeline composed of interest rate lock commitments that management believes are
probable of closing.  Additionally,  the  Company  utilizes  options on mortgage
securities  and certain other products to hedge an element of the pipeline which
is considered more uncertain of closing,  and for which  pull-through  rates are
likely to be  volatile.  During the three  months and six months ended March 31,
2001,  the  Company's  risk  management  strategy was effective in the declining
interest  rate  environment  as the  increase  in  the  value  of the  Company's
commitments  more  than  offset  the  losses in the  value of the  related  risk
management derivative instruments.  During the three months and six months ended
March 31,  2001,  a net gain of  approximately  $5.7  million and $8.0  million,
respectively   attributable  to  pipeline  hedging  results  was  recognized  to
earnings.  Pursuant to the requirements of SFAS 133 (which are discussed in note
5 to  the  Company's  consolidated  financial  statements)  interest  rate  lock
commitments and related risk management derivative instruments are accounted for
as  non-designated  derivatives with changes in their values recorded to current
earnings.

Interest  rate  lock  commitments  that  are  ultimately   funded  (closed)  are
classified  as loans held for sale and are  included in the  Company's  mortgage
inventory.  Closed loans in the mortgage  inventory are also subject to interest
rate and pricing risk. The Company's risk management program involves the use of
mortgage  forward  delivery  contracts  to  hedge  100%  of its  agency-eligible
conforming  loans as forecasted  loan sales.  Pursuant to the terms of SFAS 133,
the Company accounts for the forward  delivery  contracts as cash flow hedges of
forecasted loan sales. The forward  contracts  achieve  effective offset against
the changes in the value of the loans in that the forward contracts  effectively
fix the  future  loan  delivery  price.  At March 31,  2001,  losses on  forward
delivery contracts of $0.9 million were included in other  comprehensive  income


                                       23
<PAGE>

(OCI). Pursuant to the requirements of SFAS 133, the related unrealized gains in
the  underlying  mortgage loans  accounted for as forecasted  loan sales are not
recognized in the Company's financial  statements at March 31, 2001. Rather, the
unrealized  gains will be recognized to earnings on the loan  settlement  dates,
together with the related  deferred  hedge losses that will be  reclassified  to
earnings (from OCI) as the forecasted loan sales are  consummated  over the next
90 days.

Risk Management of Mortgage Servicing Rights (Restated)

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

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

The Company's risk  management  program  involves the use of a portfolio of risk
management  derivative  instruments,  which  increase in value as interest rates
decline.  More  specifically,   management  uses  a  combination  of  derivative
instruments  designed to provide effective offset to changes in the value of the
mortgage servicing rights in different interest rate scenarios. The Company also
attempts  to  manage  basis  risk,  term  sector  risk,  and  liquidity  risk by
diversifying  its  portfolio  with an array of derivative  instruments  that are
approved for use by the  Company's  ALCO.  Accordingly,  the hedge  portfolio is
generally  comprised of mortgage  products,  swap products and treasury products
that are structured along various points of the yield curve.

Since the inception of HomeSide in March of 1996,  the Company's  hedge strategy
has been effective in providing  effective offset to changes in the value of its
mortgage  servicing  rights.  However,  as of quarter ended March 31, 2001,  the
Company did not qualify for hedge  accounting  pursuant to the  requirements  of
SFAS 133 (see Note 2). As a result,  the Company  recognized to current earnings
$264.2 million in gains on derivatives determined to no longer qualify for hedge
accounting and a $277.5 million impairment  provision for the mortgage servicing
rights asset for the three months ended March 31, 2001. For the six months ended
March 31, 2001,  the Company  recognized to current  earnings  $634.6 million in
gains on derivatives  determined to no longer qualify for hedge accounting and a
$902.4 million impairment provision for the mortgage servicing rights asset.

Risk Management of Corporate Funding

As part of its corporate  funding and balance sheet management  strategies,  the
Company  maintains a desired level of its total  borrowings  through  short-term
funding sources.  To meet the Company's  financing needs,  short-term funding is
provided  through the  Company's  commercial  paper  program and its  short-term
facility with the Parent.  Additionally,  the Company can alter its weighting in
fixed-rate funding by converting  medium-term notes to floating rate. During the
three-month  period ended March 31, 2001,  the Company was party to $750 million
in interest  rate swaps  which were  effective  in  converting  $750  million of
medium-term  notes  to  LIBOR-based  funding.  As  discussed  in  note  5 to the
financial  statements,  the interest rate swaps were accounted for as fair value
hedges of the designated medium-term notes.

Liquidity and Capital Resources

The Company's  principal  financing needs are the financing of loan  origination
activities and the investment in mortgage servicing rights. To meet these needs,
the Company  currently  utilizes  funding from its commercial  paper program,  a
credit facility with the National,  medium-term notes,  floating-rate  notes, an
independent  syndicate  of  banks,  repurchase  agreements,  and cash  flow from
operations.  HomeSide  continues  to  investigate  and  pursue  alternative  and
supplementary  methods to finance its growing  operations through the public and
private  capital  markets.  These may  include  methods  designed  to expand the
Company's  financial  capacity and reduce its cost of capital.  In addition,  to
facilitate the sale and  distribution  of certain  mortgage  products,  HomeSide
Mortgage Securities,  Inc., a wholly owned subsidiary of HomeSide Lending, Inc.,
may continue to issue mortgage-backed securities.


                                       24
<PAGE>


Operations

Net cash used in operating  activities  for the quarter ended March 31, 2001 was
$111.1 million.  Net cash provided by operating activities for the quarter ended
March 31, 2000 was $515.6 million. Net cash provided by operating activities for
the six month  periods  ended March 31,  2001 and 2000 were  $292.7  million and
$718.1  million,  respectively.  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 loan production levels.

Investing

Net cash used in investing  activities for the quarters ended March 31, 2001 and
2000 were $152.1  million  and $516.3  million,  respectively.  Net cash used in
investing  activities  for the  six-month  periods ended March 31, 2001 and 2000
were $535.6  million and $801.3  million,  respectively.  Cash used in investing
activities was primarily for the purchase of mortgage  servicing rights and risk
management  contracts.  Cash was  provided  by  proceeds  from  risk  management
contracts  and  early  pool  buyout  reimbursements.  Future  uses of  cash  for
investing  activities will be dependent on the mortgage  origination  market and
HomeSide's hedging needs. HomeSide is not able to estimate the timing and amount
of cash uses for future acquisitions of other mortgage banking entities, if such
acquisitions were to occur.

Financing

Net cash provided by financing  activities  for the quarter ended March 31, 2001
was $394.7 million.  Net cash used in financing activities for the quarter ended
March 31, 2000 was $301.1 million. Net cash provided by financing activities for
the  six-month  periods  ended March 31,  2001 and 2000 were $322.7  million and
$184.5 million, respectively.  Cash was provided by borrowings from the National
and the issuance of  commercial  paper and medium-term notes.  Cash was used for
repayment of borrowings from the National,  payment of debt issue costs, payment
of dividends to the Parent, and repayment of medium-term notes.

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


Quantitative and Qualitative Market Risk

There have been no material  changes in the Company's market risk from September
30, 2000. For  information  regarding the Company's  market risk,  refer to Form
10-K for the fiscal year ended  September  30,  2000 of HomeSide  International,
Inc.



















                                       25
<PAGE>


                           PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings
        -----------------

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

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



ITEM 6. Exhibits and Reports on Form 8-K
        --------------------------------

(a)  The following document is filed as a part of this Report:

Number            Description
------            -----------

10.1              Amended NAB Group - USA Deferred Compensation Plan Dated as of
                  March 20, 2001
10.2              First  Amendment  to Rabbi Trust  Agreement  between  HomeSide
                  Lending, Inc. and SunTrust Banks of Florida, Inc. Effective as
                  of February 1, 2001


(b)  Reports on form 8-K

HomeSide filed no reports on Form 8-K during the quarter ended March 31, 2001.
















                                       26
<PAGE>


                                   SIGNATURES

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

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

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


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




















                                       27