HOMESIDE LENDING INC
10-Q, 1998-01-14
MORTGAGE BANKERS & LOAN CORRESPONDENTS
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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

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

                For the quarterly period ended November 30, 1997

                                       OR

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

                           Commission File No. 1-12979

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

                                     Florida
         (State or other jurisdiction of incorporation or organization)


                                   59-2725415
                      (I.R.S. Employer Identification No.)




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

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



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



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

            Class                       Outstanding at December 29, 1997
 ----------------------------           --------------------------------
 Common stock $1.00 par value                      100 shares


                                       1
<PAGE>
                              FINANCIAL INFORMATION

ITEM 1.  Financial Statements

<TABLE>

                     HOMESIDE LENDING, INC. and SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET

                    (Dollars in Thousands, Except Share Data)
<CAPTION>


                                                                                    (Unaudited)
                                                                                 November 30, 1997  February 28, 1997
                                                                                 -----------------  -----------------
<S>                                                                              <C>                <C>
ASSETS

Cash and cash equivalents                                                        $         16,590   $         52,691
Mortgage loans held for sale, net                                                         984,706            805,274
Mortgage servicing rights, net                                                          1,733,469          1,596,838
Accounts receivable, net                                                                  252,722            157,518
Early pool buyout advances                                                                311,717                 --
Premises and equipment, net                                                                35,414             29,515
Other assets                                                                              158,447             75,485
                                                                                 -----------------  -----------------    
Total Assets                                                                     $      3,493,065   $      2,717,321
                                                                                 =================  =================
LIABILITIES AND STOCKHOLDERS' EQUITY

Notes payable                                                                     $     1,732,649   $      1,818,503
Accounts payable and accrued liabilities                                                  140,155            123,231
Deferred income taxes                                                                     186,656            142,415
Long-term debt                                                                            770,671             21,128
                                                                                  ----------------  -----------------
Total Liabilities                                                                       2,830,131          2,105,277
                                                                                  ----------------  -----------------

Common stock:
     Common stock, $1.00 par value, 10,000 shares authorized and 100 shares
       issued and outstanding, all pledged as second priority collateral on 
       the long-term debt of the Parent                                                  
Additional paid-in capital                                                                573,092            573,092
Retained earnings                                                                          89,842             38,952             
                                                                                  ----------------  -----------------      
Total Stockholder's Equity                                                                662,934            612,044
                                                                                  ----------------  -----------------
Total Liabilities and Stockholder's Equity                                         $    3,493,065    $     2,717,321
                                                                                  ================  =================

</TABLE>


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

                                       2
<PAGE>
<TABLE>
                     HOMESIDE LENDING, INC. and SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)

                             (Dollars in Thousands)

<CAPTION>

                                                                                                                   For the Period
                                                          For the Three      For the Three      For the Nine       from March 16,
                                                          Months Ended       Months Ended       Months Ended       1996 to
                                                          November 30, 1997  November 30, 1996  November 30, 1997  November 30, 1996
                                                          -----------------  -----------------  -----------------  -----------------
<S>                                                       <C>                <C>                <C>                <C>
REVENUES:

Mortgage servicing fees                                   $        107,606   $         90,492   $        308,423   $        214,156
Amortization of mortgage servicing rights                          (58,004)           (48,120)          (159,322)          (104,315)
                                                          -----------------  -----------------  -----------------  -----------------
    Net servicing revenue                                           49,602             42,372            149,101            109,841

Interest income                                                     28,470             25,241             74,354             60,230
Interest expense                                                   (23,349)           (16,140)           (61,222)           (46,416)
                                                          -----------------  -----------------  -----------------  -----------------
    Net interest revenue                                             5,121              9,101             13,132
                                                                                                                             13,814
Net mortgage origination revenue                                    20,676             16,521             59,186             43,604
Other income                                                           220                 79              1,257                541
                                                          -----------------  -----------------  -----------------  -----------------
    Total Revenues                                                  75,619             68,073            222,676            167,800

EXPENSES:

Salaries and employee benefits                                      19,191             20,650             58,474             53,307
Occupancy and equipment                                              4,262              3,337             11,889              8,267
Servicing losses on investor-owned loans
  and foreclosure-related expenses                                   5,171              4,957             15,680             12,953
Other expenses                                                       9,617             11,391             29,084             28,932
                                                          -----------------  -----------------  -----------------  -----------------
    Total Expenses                                                  38,241             40,335            115,127            103,459

Income before income taxes                                          37,378             27,738            107,549             64,341
Income tax expense                                                  14,577             11,373             41,947             26,380
                                                          -----------------  -----------------  -----------------  -----------------
Net Income                                                $         22,801   $         16,365   $         65,602   $         37,961
                                                          =================  =================  =================  =================

</TABLE>

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



                                       3
<PAGE>


<TABLE>


                     HOMESIDE LENDING, INC. and SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (UNAUDITED)

                             (Dollars in Thousands)
                                    .........
<CAPTION>
                                                                                                                   For the Period
                                                          For the Three      For the Three      For the Nine       from March 16,
                                                          Months Ended       Months Ended       Months Ended         1996 to
                                                          November 30, 1997  November 30, 1996  November 30, 1997  November 30, 1996
                                                          -----------------  -----------------  -----------------  -----------------
<S>                                                       <C>                 <C>                <C>               <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:

Net income                                                $         22,801   $         16,365   $         65,602   $         37,961
Adjustments to reconcile net income to net cash provided
  by (used in) operating activities:
  Amortization of mortgage servicing rights                         58,004             48,120            159,322            104,315
  Depreciation and amortization                                      2,829              1,870              6,786              6,259
  Servicing losses on investor-owned loans expenses                  3,682              4,957             10,247             12,953
  Deferred income tax expense                                       18,396             11,373             45,765             26,380
  Capitalized excess servicing rights                                   --             (7,133)                --            (16,373)
  Mortgage loans originated and purchased for sale             (6,564,839)         (3,527,008)       (19,087,320)        (9,081,815)
  Proceeds and principal repayments of mortgage loans held       
    for sale                                                     6,609,753          3,716,620         18,907,888          8,853,510
  Change in accounts receivable                                   (71,814)            (59,129)          (105,451)           (78,235)
  Changes in other assets and accounts payable and accrued        
    liabilities                                                    (16,891)           (37,444)           (21,730)           (33,941)
                                                          -----------------  -----------------  -----------------  -----------------
Net cash provided by (used in) operating activities                 61,921            168,591            (18,891)          (168,986)

CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:

Purchase of premises and equipment, net                            (4,539)               (596)            (9,754)            (3,354)
Acquisition of mortgage servicing rights                         (146,598)            (96,639)          (404,904)          (344,288)
Net purchases of risk management contracts                         148,058             (9,549)            67,145            (88,438)
Early pool buyout advances                                          56,689                 --           (311,717)                --
Acquisition of BancBoston Mortgage Corp., net of cash                                                                      
acquired                                                                --                 --                 --           (133,392)
Acquisition of Barnett Mortgage Corp., net of cash acquire              --                 --                 --           (106,244)
                                                          -----------------  -----------------  -----------------  -----------------
Net cash provided by (used in) investing activities                 53,610           (106,784)         (659,230)           (675,716)

CASH FLOWS (USED IN) PROVIDED BY FINANCING ACTIVITIES:

Net borrowings from (repayments to) banks                         (135,680)           (77,419)           (85,854)           526,480
Issuance of notes payable                                           45,000                 --            750,000                 --
Payment of debt issue costs                                          (825)                847             (6,957)           (12,773)
Repayment of long-term debt                                          (154)               (148)              (457)              (417)
Capital contribution from parent                                        --             (6,350)                --            346,415
Dividends paid to parent                                           (7,313)             (5,545)           (14,712)           (13,820)
                                                          -----------------  -----------------  ---------------- -------------------
Net cash (used in) provided by financing activities               (98,972)            (88,615)           642,020            845,885

Net increase (decrease) in cash and cash equivalents                16,559            (26,808)           (36,101)             1,183
Cash and cash equivalents at beginning of period                        31             27,991             52,691                 --
                                                          =================  =================  ================ ===================
Cash and cash equivalents at end of period                $         16,590   $          1,183   $         16,590   $          1,183
                                                          =================  =================  ================ ===================
</TABLE>


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


                                       4
<PAGE>


                     HOMESIDE LENDING, INC. and SUBSIDIARIES
                   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 nine months  ended  November 30,
1997 are not necessarily  indicative of the results that may be expected for the
fiscal year ending  February 28,  1998.  For further  information,  refer to the
consolidated   financial  statements  and  footnotes  thereto  included  in  the
Prospectus dated May 15, 1997 filed with the Securities and Exchange  Commission
("SEC") as part of the Registration  statement on Form S-1 (Registration  Number
333-21193,  the  "Shelf  Registration  Statement")  of  HomeSide  Lending,  Inc.
("HomeSide Lending" or the "Company") and the annual report on Form 10-K for the
fiscal year ended February 28, 1997 of HomeSide, Inc. (the "Parent").

      HomeSide   Lending,   Inc.  (the  "Company")  and  collectively  with  its
consolidated subsidiaries ("HomeSide Lending"), the primary operating subsidiary
of the Parent, is one of the largest full service  residential  mortgage banking
companies in the United States,  formed through the  acquisition of the mortgage
banking  operations of  BankBoston,  N.A.,  formerly known as The First National
Bank of Boston ("Bank of Boston"), and Barnett Banks, Inc. ("Barnett"). HomeSide
Lending is a  wholly-owned  subsidiary  of HomeSide  Holdings,  Inc.  which is a
wholly-owned subsidiary of the Parent. The Parent has no operations and its only
significant  assets are its  investments in HomeSide  Holdings,  Inc.,  HomeSide
Lending and certain capitalized debt issuance costs. The Parent has $130 million
in outstanding  long-term debt. All of the stock of HomeSide Holdings,  Inc. and
HomeSide Lending is pledged as collateral on the debt of the Parent.  The Parent
is dependent upon dividends from HomeSide  Holdings,  Inc. and HomeSide  Lending
for the cash flow necessary to service the Parent's debt.

2.  MORTGAGE SERVICING RIGHTS

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

Balance, February 28, 1997                             $1,596,838
Additions                                                 404,904
Deferred hedge loss                                     (108,951)
Amortization                                            (159,322)
                                                   ---------------

Balance, November 30, 1997                             $1,733,469
                                                   ===============

3.  NOTES PAYABLE

    HomeSide  Lending  borrows  funds  on a  demand  basis  from an  independent
syndicate of banks under a $2.5 billion credit facility which, at the request of
HomeSide Lending,  may be increased to $3.0 billion.  The line of credit is used
to provide funds for HomeSide Lending's  business of originating,  acquiring and
servicing  mortgage loans.  The line of credit includes both a warehouse  credit
facility,  which is limited to 98% of the fair value of eligible  mortgage loans
held for  sale,  and a  servicing-related  facility,  which is  capped at $950.0
million.  On February 14, 2000 the line of credit will terminate.  The bank line
of credit agreement  contains covenants that impose limitations and restrictions
on HomeSide  Lending,  including the  maintenance of certain net worth and ratio
requirements.  Under certain  circumstances  set forth in the credit  agreement,
borrowings under the agreement  become  collateralized  by substantially  all of
HomeSide   Lending's  assets.   HomeSide  Lending  is  in  compliance  with  all
requirements  relating to the credit  agreement.  At  November  30,  1997,  $1.7
billion is outstanding  under the credit line.  Amounts  outstanding at November
30,  1997  under the bank line of credit are  comprised  of a  warehouse  credit
facility of $962.6  million and a  servicing-related  credit  facility of $770.0
million.  The  amount of the unused  bank line of credit was $0.8  billion as of
November 30, 1997.


                                       5
<PAGE>

    Borrowings  under the bank line of credit bear  interest at rates per annum,
based on, at  HomeSide  Lending's  option (A) the highest of (i) the lead bank's
prime rate,  (ii) the secondary  market rate of certificates of deposit plus 100
basis  points and (iii) the federal  funds rate in effect from time to time plus
0.5%, or (B) various rates based on federal fund rates and eurodollar  rates. At
November 30, 1997, the weighted  average  interest rate on the amounts  borrowed
under the bank credit facility was 6.05%.  The weighted  average  interest rates
during the three and nine month periods ended November 30, 1997 were 6.05%,  and
6.03%, respectively.

4.  LONG-TERM DEBT

     On May 14,  1996,  the Parent  issued  $200.0  million of 11.25% notes (the
"Parent Notes")  maturing on May 15, 2003, and paying  interest  semiannually in
arrears on May 15 and November 15 of each year, commencing on November 15, 1996.
The Parent  Notes are  redeemable  at the option of the  Parent,  in whole or in
part, at any time on or after May 15, 2001, at certain fixed redemption  prices.
The indenture  contains  covenants  that impose  limitations  and  restrictions,
including  the  maintenance  of  certain  net worth and ratio  requirements.  In
addition,  the Parent  Notes are secured by a second  priority  pledge of common
stock of HomeSide  Lending.  The Parent is in compliance  with all net worth and
ratio  requirements  included in the indenture relating to the Parent Notes. The
Parent 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 November 30, 1997 is $ 130.0 million.

     As of November 30, 1997,  outstanding  medium-term notes issued by HomeSide
Lending under a  registration  statement  filed with the Securities and Exchange
Commission (SEC) were as follows (in thousands):

Issue Date            Outstanding Balance   Interest Rate     Maturity Date
- -----------------     -------------------   -------------     ------------------
May 20, 1997                 $250,000          6.890%         May 15, 2000
June 30, 1997                 200,000          6.883%         June 30, 2002
June 30, 1997                  40,000          6.820%         July  2, 2001
July  1, 1997                  15,000          6.860%         July  2, 2001
July 31, 1997                 200,000          6.818%         August 1, 2004
September 15, 1997             45,000          6.770%         September 17, 2001
                      -------------------

Total                        $750,000
                      ===================

     As of November  30, 1997,  $650.0  million of the  outstanding  medium-term
notes  had been  effectively  converted  by  interest  rate swap  agreements  to
floating-rate  notes. The weighted  average  borrowing rates on medium-term note
borrowings  issued for the three and nine month periods ended November 30, 1997,
including the effect of the interest rate swap agreements, were 6.77% and 6.20%,
respectively.  Net proceeds from the issuances were primarily used to reduce the
amounts  outstanding under the bank credit agreement.  Amounts were subsequently
reborrowed to fund an early pool buyout program,  which involves the purchase of
delinquent government loans from pools early in the foreclosure process, thereby
reducing the carrying  cost of  servicing  such loans.  As of November 30, 1997,
$250.0 million was available for future  issuances under the Shelf  Registration
Statement.

5.  EARLY POOL BUYOUT ADVANCES

     During fiscal 1998, HomeSide Lending initiated an early pool buyout program
which involves the purchase of delinquent  government  loans from pools early in
the foreclosure process, thereby reducing the unreimbursed interest expense that
HomeSide Lending incurs.  The funding of the purchases of these delinquent loans
for the early pool buyout program is recorded as interest expense,  and interest
income  earned  from the  guarantor  agency  during the  foreclosure  process is
accrued to match the funding expense incurred.  Scheduled interest payments made
to the investor  before the loans were  purchased  from the pool are recorded as
early pool buyout advances with a reserve for advances which will not ultimately
be collected.

6.  COMMITMENTS AND CONTINGENCIES

    On October 25, 1997, the Parent and National Australia Bank ("the National")
entered  into an  Agreement  and Plan of Merger  under which the  National  will
acquire the Parent.  The National will pay $27.825 in cash for each share of the
Parent's stock, or a total of US$1.2 billion (AUD$1.7 billion).  The transaction
is subject to regulatory approvals and approval by the Parent's  stockholders at
a special  stockholders'  meeting  scheduled for January 16, 1998.  The Parent's
major  stockholders,  who  collectively  own  approximately  76% of the Parent's
outstanding  common  stock,  have agreed to vote in favor of the approval of the
transaction at the stockholders' meeting.
The  proposed  transaction  is expected  to close early in the first  quarter of
calendar 1998.

                                       6
<PAGE>


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

General

      HomeSide   Lending,   Inc.  (the  "Company")  and  collectively  with  its
consolidated  subsidiaries  ("HomeSide  Lending"),  the primary and wholly-owned
operating  subsidiary  of  the  Parent,  is  one of  the  largest  full  service
residential mortgage banking companies in the United States,  formed through the
acquisition of the mortgage  banking  operations of BankBoston,  N.A.,  formerly
known as The First  National Bank of Boston  ("BankBoston"),  and Barnett Banks,
Inc. ("Barnett").  HomeSide Lending's strategy emphasizes variable cost mortgage
origination and low cost loan servicing. Headquartered in Jacksonville, Florida,
HomeSide  Lending  ranks  as the 4th  largest  originator  and  the 7th  largest
servicer in the United States for the nine months ended September 30, 1997 based
on data published by Inside Mortgage Finance.

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

  Forward-Looking Statements

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

Loan Production Activities

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

      The  following   information  regarding  loan  production  activities  for
HomeSide Lending is presented to aid in understanding  the results of operations
and financial  condition of HomeSide Lending for the three months ended November
30,  1997,  the three months  ended  November 30, 1996,  and for the nine months
ended  November 30, 1997 and the period from March 16, 1996 to November 30, 1996
(in millions):
<TABLE>
<CAPTION>


                                                                                           For the Period
                                  For the Three      For the Three      For the Nine       from March 16,
                                  Months Ended       Months Ended       Months Ended          1996 to
                                  November 30, 1997  November 30, 1996  November 30, 1997  November 30, 1996          
                                  -----------------  -----------------  -----------------  -----------------
<S>                               <C>                <C>                <C>                <C>
Correspondent                     $          3,310   $          3,249   $         10,334   $          8,092
Co-issue                                     1,745              1,985              4,422              5,612
Broker                                         319                168              1,015                543
                                  -----------------  -----------------  -----------------  -----------------
Total wholesale                              5,374              5,402             15,771             14,247
Direct                                         106                139                250                566
                                  -----------------  -----------------  -----------------  -----------------
Total production                             5,480              5,541             16,021             14,813
Bulk acquisitions                            1,085                  0              3,066              4,073
                                  =================  =================  =================  =================
Total production and acquisitions $          6,565   $          5,541   $         19,087   $         18,886
                                  =================  =================  =================  =================
</TABLE>

                                       7
<PAGE>

      Total loan production,  excluding bulk acquisitions,  was $5.5 billion for
the three months ended  November 30, 1997,  approximately  equal to  production,
excluding bulk acquisitions,  for the three months ended November 30, 1996. Loan
production  for  the  nine  months  ended  November  30,  1997,  excluding  bulk
acquisitions, increased $1.2 billion to $16.0 billion from $14.8 billion for the
period from March 16, 1996 to November 30, 1996.  The increases  were  primarily
due to  growth  in  HomeSide  Lending's  correspondent  lending  channel,  which
increased 27% to $10.3 billion for the nine months ended  November 30, 1997 from
$8.1  billion  for the period  from March 16,  1996 to  November  30,  1996.  In
addition,   the  May  31,  1996  acquisition  of  Barnett  Mortgage  Company,  a
wholly-owned  subsidiary  of  Barnett  ("BMC")  and  the  preferred  partnership
agreement  with Barnett under which all loans  originated by Barnett are sold to
HomeSide contributed to the growth in production for the nine month period ended
November  30, 1997  compared  to the period from March 16, 1996 to November  30,
1996.  HomeSide  Lending also made bulk servicing  acquisitions  of $1.1 billion
during  the  three  months  ended  November  30,  1997,  with no bulk  servicing
acquisitions occurring during the three months ended November 30, 1996.

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

   Servicing Portfolio

      Management  believes  that HomeSide  Lending is one of the most  efficient
mortgage  servicers in the industry based on its servicing cost per loan and the
number of loans serviced per employee.  The servicing  operation makes extensive
use  of  state-of-the-art   technology,   process   re-engineering  and  expense
management. With a portfolio size of approximately $98 billion, HomeSide Lending
services the loans of over one million  homeowners from across the United States
and  is  committed  to  protecting  the  value  of  this  important  asset  by a
sophisticated  risk management  strategy.  HomeSide Lending  anticipates its low
cost of servicing loans will continue to maximize the bottom-line  impact of its
growing servicing portfolio.  HomeSide Lending's focus on efficient and low cost
processes is pursued  through the  selective  use of  automation  as well as the
strategic  outsourcing of selected servicing  functions and effective control of
delinquencies and foreclosures.

      The  following  information  on the dollar  amounts of loans  serviced  is
presented  to aid in  understanding  the  results of  operations  and  financial
condition  of  HomeSide  Lending  for the three  months  and nine  months  ended
November 30, 1997,  the three months ended November 30, 1996, and for the period
from March 16, 1996 to November 30, 1996 (in millions):

<TABLE>
<CAPTION>

                                                                                           For the Period
                                  For the Three      For the Three      For the Nine       from March 16,
                                  Months Ended       Months Ended       Months Ended          1996 to
                                  November 30, 1997  November 30, 1996  November 30, 1997  November 30, 1996
                                  -----------------  -----------------  -----------------  ----------------- 
<S>                               <C>                <C>                <C>                <C>
Balance at beginning of period    $         95,429   $         84,819   $         89,218   $         41,844
Acquisition of BMC                              --                 --                 --             33,082
Other additions                              6,565              5,244             19,087             19,188
                                  -----------------  -----------------  -----------------  -----------------
     Total additions                         6,565              5,244             19,087             52,270
                                  -----------------  -----------------  -----------------  -----------------
Scheduled amortization                         534                494              1,598              1,176
Prepayments                                  3,120              1,529              7,966              4,552
Foreclosures                                   220                106                532                373
Sales of servicing                             337                221                426                300
                                  -----------------  -----------------  -----------------  -----------------
     Total reductions                        4,211              2,350             10,522              6,401
                                  =================  =================  =================  =================
Balance at end of period          $         97,783   $         87,713   $         97,783   $         87,713
                                  =================  =================  =================  =================
</TABLE>

     The number of loans serviced at November 30, 1997 was  1,161,547,  compared
to 1,068,000 at November 30, 1996.  HomeSide  Lending's strategy is to build its
mortgage servicing  portfolio by concentrating on variable cost loan origination
strategies,  and as a result, benefit from improved economies of scale. A key to
HomeSide Lending's future growth is the proprietary servicing software purchased
from Barnett.  This system will allow  HomeSide to double its current  servicing
capacity on a single  system.  During the three months ended  November 30, 1997,
HomeSide  Lending  transferred  approximately  one-third  of  the  loans  to its
proprietary servicing software.  After the transfer,  over half of the servicing
portfolio is serviced on the proprietary  system.  The transfer of the remaining
portfolio is expected to occur by the end of 1998.

                                       8
<PAGE>
Results of Operations

Three months ended November 30, 1997 compared to three months ended November 30,
1996

   Summary

      HomeSide Lending's net income increased 39% to $22.8 million for the three
months  ended  November  30, 1997 from $16.4  million for the three months ended
November 30, 1996.  Total  revenues for the three months ended November 30, 1997
increased  11% to $75.6  million  from $68.1  million for the three months ended
November 30, 1996. The increases in net income and revenues for the three months
ended  November 30, 1997  compared to the three  months ended  November 30, 1996
were  primarily  attributable  to  increases  of $7.2  million in net  servicing
revenue  and $4.2  million in net  mortgage  origination  revenue,  while  total
expenses  decreased by $2.1 million.  The increase in net servicing  revenue was
mainly a result of a $10.1 billion increase in the servicing  portfolio to $97.8
billion at  November  30,  1997 from $87.7  billion at November  30,  1996.  Net
mortgage  origination  revenue  increased  due to gains in  secondary  marketing
activities.

    Net Servicing Revenue

      Net  servicing  revenue  was  $49.6  million  for the three  months  ended
November 30, 1997 compared to $42.4 million for the three months ended  November
30,  1996.  Net  servicing  revenue is  comprised  of mortgage  servicing  fees,
ancillary servicing revenue, and amortization of mortgage servicing rights.

      Mortgage  servicing  fees  increased  19% to $107.6  million for the three
months  ended  November  30, 1997 from $90.5  million for the three months ended
November 30, 1996,  primarily as a result of growth of the  servicing  portfolio
through loan production channels and bulk servicing acquisitions.  The servicing
portfolio  increased  to $97.8  billion at November  30, 1997  compared to $87.7
billion at November  30,  1996,  a 12%  increase.  HomeSide  Lending's  weighted
average interest rate of the mortgage loans in the servicing portfolio was 7.87%
at November  30, 1997 and 7.91% at  November  30,  1996.  The  weighted  average
servicing  fee,  including  ancillary  income,  for the servicing  portfolio was
0.444% and 0.418% for the three  months  ended  November  30, 1997 and the three
months  ended  November  30,  1996,  respectively.  The increase in the weighted
average  servicing  fee from the three months  ended  November 30, 1997 from the
three  months ended  November 30, 1996 was due to growth of ancillary  revenues,
including late fees and other mortgage-related  products, and higher proportions
of government  loans  serviced  which  typically  have a higher  servicing  fee.
Amortization  expense  increased  to $58.0  million for the three  months  ended
November 30, 1997 from $48.1  million for the three  months  ended  November 30,
1996 mainly as a result of a higher average balance of mortgage servicing rights
and a decrease of 57 basis points in average  mortgage  interest  rates from the
three  months ended  November  30, 1996 to the three  months ended  November 30,
1997.  Amortization  charges are highly  dependent upon the level of prepayments
during  the  period  and   changes  in   prepayment   expectations,   which  are
significantly  influenced by the direction and level of long-term  interest rate
movements.  A decrease  in  mortgage  interest  rates  results in an increase in
prepayment estimates used in calculating periodic amortization expense.  Because
mortgage  servicing rights are amortized over the expected period of service fee
revenues,  an increase in mortgage  prepayment  activity  typically results in a
shorter estimated life of the mortgage servicing assets and, accordingly, higher
amortization expense.

   Net Interest Revenue

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

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

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

                                       9
<PAGE>

      Net interest revenue  decreased $4.0 million to $5.1 million for the three
months  ended  November  30, 1997 from $9.1  million for the three  months ended
November 30, 1996,  primarily  due to a decrease in the spread  between  average
mortgage interest rates and average short-term borrowing rates on mortgage loans
held for sale and an increase in interest  expense,  caused by increases in paid
in full  scheduled  interest  payments  and a  higher  funding  of the  mortgage
servicing  assets.  During the three  months ended  November 30, 1997,  HomeSide
Lending  issued $45  million  of  medium-term  notes to the public  market at an
average  cost of 6.77% as of November 30,  1997.  The proceeds  were used to pay
down existing bank debt,  increasing HomeSide's borrowing capacity. An immediate
benefit of this  increased  borrowing  capacity was the investment in HomeSide's
early pool buyout program,  which involves the purchase of delinquent government
loans  from  pools  early  in the  foreclosure  process,  thereby  reducing  the
unreimbursed interest expense that HomeSide incurs.

Net Mortgage Origination Revenue

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

      Net mortgage  origination  revenue was $20.7  million for the three months
ended  November  30, 1997  compared to $16.5  million for the three months ended
November  30,  1996, a 25%  increase.  The increase in net mortgage  origination
revenue during the three months ended November 30, 1997 as compared to the three
months  ended  November  30, 1996  reflects an increase in gains from  secondary
marketing activities.

   Salaries and Employee Benefits

      Salaries and  employee  benefits  expense was $19.2  million for the three
months ended  November 30, 1997  compared to $20.7  million for the three months
ended  November  30,  1996 due to the  continuing  integration  of BMC  mortgage
servicing  systems acquired on May 31, 1996 and decreases in commission  expense
from the  elimination  of the  retail  branch  network.  The  average  number of
full-time  equivalent  employees  increased  to 1,805 for the three months ended
November 30, 1997 from 1,708 for the three months ended November 30, 1996.

   Occupancy and Equipment Expense

      Occupancy and equipment expense primarily includes rental expense, repairs
and maintenance  costs,  certain computer  software expenses and depreciation of
HomeSide Lending's  premises and equipment.  Occupancy and equipment expense for
the three  months  ended  November  30, 1997 was $4.3  million  compared to $3.3
million for the three  months ended  November 30, 1996.  The increase in expense
was mainly due to office  renovation,  personal property taxes, and the increase
in information  systems costs required to handle the growing mortgage  servicing
portfolio.

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

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

      During the three months ended November 30, 1997,  the servicing  losses on
investor-owned  loans and  foreclosure-related  expenses  totaled  $5.2  million
compared to $5.0  million for the three months  ended  November  30,  1996.  The
increase  was  largely  attributable  to the growth of the  servicing  portfolio
resulting  from loan  production  and increased  foreclosure  losses,  which are
likely to continue at this level as the servicing portfolio ages.

      Included  in the balance of accounts  payable and accrued  liabilities  at
November 30, 1997 is a reserve for estimated  servicing losses on investor-owned
loans of $21.7 million.  The reserve has been  established for potential  losses
related to the  mortgage  servicing  portfolio.  Increases  to the  reserve  are
charged to earnings as servicing losses on investor-owned  loans. The reserve is
decreased  for  actual  losses  incurred  related  to  the  mortgage   servicing
portfolio.  HomeSide Lending's  historical loss experience on VA loans generally
has been consistent with industry experience.  Management believes that HomeSide
has  an  adequate  level  of  reserve  based  on  servicing  volume,   portfolio
composition,  credit  quality and  historical  loss rates,  as well as estimated
future losses.

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

                        Servicing Portfolio Delinquencies
                             (percent by loan count)

                                       November 30, 1997  November 30, 1996
                                       -----------------  -----------------
Servicing Portfolio Delinquencies,
 excluding bankruptcies
 (at end of period)
          30 days                             4.12%               3.50%
          60 days                             0.82%               0.68%
          90+ days                            0.69%               0.58%
                                       -----------------  -----------------
               Total past due                 5.63%               4.76%
                                       =================  =================

          Foreclosures pending                0.73%               0.64%
                                       =================  =================


   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  Lending's  mortgage  servicing  portfolio  and loan
production volumes.

      Other  expenses  during the three months ended November 30, 1997 were $9.6
million  compared to $11.4 million for the three months ended November 30, 1996,
primarily  due to the  continuing  integration  of the  BMC  mortgage  servicing
operations acquired on May 31, 1996.

   Income Tax Expense

      HomeSide  Lending's  income tax  expense  was $14.6  million for the three
months  ended  November  30, 1997 and $11.4  million for the three  months ended
November 30,  1996.  The  effective  income tax rates for the three months ended
November  30,  1997  and  the  three   months  ended   November  30,  1996  were
approximately 39% and 41%, respectively.


Results of Operations

Nine months ended  November  30, 1997  compared to period from March 16, 1996 to
November 30, 1996

   Summary

      HomeSide  Lending's net income increased 73% to $65.6 million for the nine
months ended  November 30, 1997 from $38.0 million for the period from March 16,
1996 to November 30, 1996. Total revenues for the nine months ended November 30,
1997  increased  33% to $222.7  million from $167.8  million for the period from
March 16, 1996 to November  30, 1996.  The  increases in net income and revenues
for the nine months ended  November  30, 1997  compared to the period from March
16, 1996 to November 30, 1996 were primarily  attributable to the acquisition of
BMC on May 31, 1996 and increases of $39.3 million in net servicing  revenue and
$15.6 million in net mortgage  origination  revenue. The BMC servicing portfolio
was  $33.1  billion  at May 31,  1996  and its  acquisition  increased  HomeSide
Lending's  servicing  portfolio by 75% on that date, which was a major factor in
the increase in net servicing revenue. In addition,  subsequent increases in the
size of the  servicing  portfolio  contributed  to the  increased  revenue.  The
servicing  portfolio  increased to $97.8 billion at November 30, 1997 from $87.7
billion at November 30, 1996, a 12%  increase.  As part of the BMC  acquisition,
Barnett  agreed  to  sell  HomeSide  Lending  the  loans  produced  by the  loan
production  networks  retained by Barnett,  which contributed to the increase in
net mortgage  origination revenue. Net interest revenue increased primarily as a
result of reduced  borrowing  costs from the bank line of credit  from  improved
credit  ratings and the issuance of medium-term  notes which expanded  borrowing
capacity.

 Net Servicing Revenue

      Net  servicing  revenue  was  $149.1  million  for the nine  months  ended
November 30, 1997 compared to $109.8  million for the period from March 16, 1996
to November 30, 1996. Net servicing  revenue is comprised of mortgage  servicing
fees, ancillary servicing revenue, and amortization of mortgage servicing rights
expense.

                                       11
<PAGE>

      Mortgage  servicing  fees  increased  44% to $308.4  million  for the nine
months ended November 30, 1997 from $214.2 million for the period from March 16,
1996 to November 30,  1996,  primarily  as a result of the BMC  acquisition  and
growth of the  servicing  portfolio  through loan  production  channels and bulk
servicing  acquisitions.  The servicing  portfolio increased to $97.8 billion at
November  30, 1997  compared to $87.7  billion at November  30,  1996.  HomeSide
Lending's  weighted average interest rate of the mortgage loans in the servicing
portfolio  was 7.87% at  November  30, 1997 and 7.91%  November  30,  1996.  The
weighted average servicing fee,  including  ancillary income,  for the servicing
portfolio was 0.444% and 0.429% for the nine months ended  November 30, 1997 and
the period from March 16, 1996 to November 30, 1996, respectively.  The increase
in the weighted  average  servicing  fee for the nine months ended  November 30,
1997 from the period from March 16, 1996 to November  30, 1996 was due to growth
of  ancillary   revenues,   including   late  fees  and   revenues   from  other
mortgage-related  products,  and higher proportions of government loans serviced
which typically have a higher servicing fee.  Amortization  expense increased to
$159.3  million for the nine months ended  November 30, 1997 from $104.3 million
for the period from March 16, 1996 to November  30, 1996 mainly as a result of a
higher average balance of mortgage  servicing  rights and a decrease of 36 basis
points in average mortgage interest rates from the period from March 16, 1996 to
November  30, 1996 to the nine months  ended  November  30,  1997.  Amortization
charges are highly dependent upon the level of prepayments during the period and
changes in prepayment  expectations,  which are significantly  influenced by the
direction and level of long-term interest rate movements. A decrease in mortgage
interest  rates  results  in  an  increase  in  prepayment   estimates  used  in
calculating periodic amortization expense. Because mortgage servicing rights are
amortized  over the  expected  period of service  fee  revenues,  an increase in
mortgage  prepayment  activity  typically results in a shorter estimated life of
the mortgage servicing assets and, accordingly, higher amortization expense.

 Net Interest Revenue

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

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

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

      Net  interest  revenue  decreased  $0.7  million for the nine months ended
November 30, 1997 to $13.1  million from $13.8 million for the period from March
16, 1996 to November 30, 1996, primarily due to a decrease in the spread between
average  mortgage  interest  rates and  average  short-term  borrowing  rates on
mortgage  loans held for sale and an  increase in  interest  expense,  caused by
increases in paid in full  scheduled  interest  payments and a higher funding of
the mortgage  servicing assets.  During the nine months ended November 30, 1997,
HomeSide  Lending issued $750 million of medium-term  notes to the public market
at an average cost of 6.20% as of November 30, 1997.  The proceeds  were used to
pay down existing bank debt,  increasing  HomeSide Lending's borrowing capacity.
An immediate benefit of this increased  borrowing capacity was the initiation of
an early  pool  buyout  program,  which  involves  the  purchase  of  delinquent
government loans from pools early in the foreclosure  process,  thereby reducing
the unreimbursed interest expense that HomeSide Lending incurs.

   Net Mortgage Origination Revenue

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

      Net  mortgage  origination  revenue was $59.2  million for the nine months
ended  November 30, 1997 compared to $43.6 million for the period from March 16,
1996 to November  30,  1996,  an 36%  increase.  The  increase  in net  mortgage
origination  revenue  during the nine months ended November 30, 1997 as compared
to the  period  from  March  16,  1996 to  November  30,  1996 is due in part to
increased  production  resulting  from the preferred  seller  relationship  with
Barnett  established  as part of the BMC  acquisition.  Barnett  agreed  to sell
HomeSide  Lending loans  produced by the loan  production  networks  retained by
Barnett.  The  increase  also  reflects an increase in loan  production  volumes
primarily  through  HomeSide  Lending's  correspondent  lending  channel  and an
increase in gains from secondary marketing activities.

                                       12
<PAGE>
   Salaries and Employee Benefits

      Salaries  and  employee  benefits  expense was $58.5  million for the nine
months  ended  November 30, 1997  compared to $53.3  million for the period from
March 16, 1996 to  November  30,  1996 due to the  purchase of the BMC  mortgage
servicing  operations  acquired on May 31, 1996. The average number of full-time
equivalent  employees  increased to 1,805 for the nine months ended November 30,
1997 from 1,708 for the period from March 16, 1996 to November 30, 1996.

   Occupancy and Equipment Expense

      Occupancy and equipment expense primarily includes rental expense, repairs
and maintenance  costs,  certain computer  software expenses and depreciation of
HomeSide Lending's  premises and equipment.  Occupancy and equipment expense for
the nine  months  ended  November  30, 1997 was $11.9  million  compared to $8.3
million for the period from March 16, 1996 to November 30, 1996. The increase in
expense was mainly due to the purchase of the BMC mortgage servicing  operations
acquired on May 31, 1996.

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

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

      During the nine months ended  November 30, 1997,  the servicing  losses on
investor-owned  loans and  foreclosure-related  expenses  totaled  $15.7 million
compared to $13.0  million  for the period  from March 16, 1996 to November  30,
1996.  The  increase  was largely  attributable  to the growth of the  servicing
portfolio resulting from loan production and increased foreclosure losses, which
are likely to continue at this level as the servicing portfolio ages.

      Included  in the balance of accounts  payable and accrued  liabilities  at
November 30, 1997 is a reserve for estimated  servicing losses on investor-owned
loans of $21.7 million.  The reserve has been  established for potential  losses
related to the  mortgage  servicing  portfolio.  Increases  to the  reserve  are
charged to earnings as servicing losses on investor-owned  loans. The reserve is
decreased  for  actual  losses  incurred  related  to  the  mortgage   servicing
portfolio.  HomeSide Lending'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)

                                       November 30, 1997  November 30, 1996
                                       -----------------  ----------------- 
Servicing Portfolio Delinquencies,
 excluding bankruptcies
 (at end of period)
          30 days                              4.12%             3.50%
          60 days                              0.82%             0.68%
          90+ days                             0.69%             0.58%
                                       =================  =================
               Total past due                  5.63%             4.76%
                                       =================  =================
          Foreclosures pending                 0.73%             0.64%
                                       =================  =================

   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  Lending's  mortgage  servicing  portfolio  and loan
production volumes.

      Other  expenses  during the nine months ended November 30, 1997 were $29.1
million compared to $28.9 million for the period from March 16, 1996 to November
30,  1996,  primarily  due to the  acquisition  of the  BMC  mortgage  servicing
operations on May 31, 1996.

                                       13
<PAGE>
   Income Tax Expense

      HomeSide  Lending's  income tax  expense  was $41.9  million  for the nine
months ended  November 30, 1997 and $26.4  million for the period from March 16,
1996 to November 30, 1996. The increases were  attributable  to increases in net
income.  The effective  income tax rates for the nine months ended  November 30,
1997 and the period from March 16, 1996 to November 30, 1996 were  approximately
39% and 41%, respectively.


Risk Management Activities

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

      Since  its  formation,  HomeSide  Lending  has  utilized  options  on U.S.
Treasury  bond futures and U.S.  Treasury  bond futures to protect a significant
portion of the market value of its mortgage  servicing  portfolio from a decline
in value. The risk management  instruments used by HomeSide have characteristics
such that they tend to increase in value as interest rates decline.  Conversely,
these risk  management  instruments  tend to decline in value as interest  rates
rise. Accordingly, changes in value of these hedge instruments will tend to move
inversely with changes in value of HomeSide Lending's mortgage servicing rights.

      These risk management instruments are designated as hedges on the purchase
date and such  designation  is at a level at least as  specific  as the level at
which  mortgage  servicing  rights  are  evaluated  for  impairment.   The  risk
management  instruments  are  marked-to-market  with  changes  in  market  value
deferred  as an  adjustment  to  the  carrying  value  of the  related  mortgage
servicing  right asset being  hedged.  Changes in market value that are deferred
are amortized  and  evaluated  for  impairment in the same manner as the related
mortgage  servicing  rights.  The  effectiveness of HomeSide  Lending's  hedging
activity can be measured by the correlation  between changes in the value of the
risk  management  instruments  and  changes in the value of  HomeSide  Lending's
mortgage servicing rights.  This correlation is assessed on a quarterly basis to
ensure that high correlation is maintained over the term of the hedging program.
During each of the periods  presented,  HomeSide  Lending has experienced a high
measure of correlation between changes in the value of mortgage servicing rights
and the risk  management  instruments.  However,  in periods of rising  interest
rates,  the  increase  in value of  mortgage  servicing  rights may  outpace the
decline in value of the options included in the hedge position, because the loss
on options is limited to the premium paid.

         The hedge  strategy  continued to perform as expected  during the three
months  ended  November  30, 1997 and proved  especially  effective as long-term
rates  reached their lowest level since  November of 1996.  For the three months
ended  November  30,  1997 and  1996,  HomeSide  experienced  net  gains on risk
management contracts of $161.5 million and $133.3 million, respectively. For the
nine months  ended  November  30, 1997 and for the period from March 16, 1996 to
November 30, 1997,  net gains on risk  management  contracts were $108.9 million
and $60.2 million, respectively. The decrease in the estimated fair value of the
mortgage  servicing  rights  approximated  the  net  gains  on  risk  management
contracts for these periods.  HomeSide's future cash needs as they relate to its
hedging program will be influenced by such factors as long-term  interest rates,
loan production levels and growth in the mortgage servicing portfolio.  The fair
value of open risk  management  option  contracts at November 30, 1997 was $87.0
million,  and the fair value of open futures  contracts was $3.7 million,  which
was equal to their carrying amount because the risk  management  instruments are
marked-to-market at each reporting date.


Liquidity and Capital Resources

      The  Company's  principal  financing  needs  are  the  financing  of  loan
origination  activities  and the investment in servicing  rights.  To meet these
needs, the Company currently  utilizes funding from an independent  syndicate of
banks,  including a warehouse credit facility and a servicing-related  facility,
medium-term  notes, and cash flow from operations.  In the past, the Company has
also utilized short-term credit facilities and public offerings of common stock.
HomeSide   Lending   continues  to  investigate   and  pursue   alternative  and
supplementary  methods to finance its growing  operations through the public and
private  capital  markets.  These may  include  methods  designed  to expand the
Company's  financial  capacity and reduce its cost of capital.  In addition,  to
facilitate the sale and  distribution  of certain  mortgage  products,  HomeSide
Mortgage Securities,  Inc., a wholly owned subsidiary of HomeSide Lending, Inc.,
may issue mortgage backed securities.

                                       14
<PAGE>
   Operations

      Net cash used in  operations  was $18.9  million for the nine months ended
November 30, 1997.  Proceeds  from the  issuance of the  medium-term  notes were
primarily used to fund loan originations. These uses of cash were offset by cash
provided from servicing fee income,  loan sales and principal  repayments.  Cash
flows from loan originations are dependent upon current economic  conditions and
the level of long-term  interest  rates.  Higher cash demands to meet  increased
loan production levels are primarily met through borrowings and loan sales.

    Investing

      Net cash used in  investing  activities  was $659.2  million  for the nine
months ended November 30, 1997. Cash used in investing  activities was primarily
used for the purchase and origination of mortgage servicing rights, the purchase
of options of U.S.  Treasury bond futures as part of HomeSide  Lending's hedging
program,  and the  funding  of the  early  pool  buyout  program.  Other  assets
increased  $82.9  million to $158.4  million  at  November  30,  1997 from $75.5
million at February 28, 1997  primarily as a result of an increase in loans held
for  investment and an increase in HomeSide's  hedge asset.  Future uses of cash
for investing  activities will be dependent on the mortgage  origination  market
and HomeSide  Lending's hedging needs.  HomeSide Lending is not able to estimate
the timing and amount of cash uses for  future  acquisitions  of other  mortgage
banking entities, if such acquisitions were to occur.

   Financing

      Net cash provided by financing  activities was $642.0 million for the nine
months  ended  November  30,  1997.  The primary  source of cash from  financing
activities during the period was $750.0 million from the issuance of medium-term
notes. Cash used in financing  activities was used for the payment of debt issue
costs and repayments to HomeSide's line of credit.

      During  the  nine  months  ended  November  30,  1997,  net  cash  used in
operations was $18.9 million,  net cash used in investing  activities was $659.2
million  and net cash  provided  by  financing  activities  was $642.0  million,
resulting in a net decrease in cash of $36.1 million.  HomeSide  Lending 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  Lending  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  Lending's  portfolio of mortgage servicing rights provides a potential
source of funds to meet liquidity requirements,  especially in periods of rising
interest rates when loan origination  volume slows.  Repurchase  agreements also
provide an  alternative  to the bank line of credit for mortgages held for sale.
Future cash needs are highly  dependent on future loan  production and servicing
results, which are influenced by changes in long-term interest rates.



                           PART II - OTHER INFORMATION

ITEM 1.  Legal Proceedings

      HomeSide Lending is a defendant in a number of legal  proceedings  arising
in the normal course of business.  HomeSide Lending, 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 Lending, 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 Lending.

      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.

                                       15
<PAGE>

ITEM 6.  Exhibits and Reports on Form 8-K

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

                       Number  Description

                          2    Agreement  and  Plan of  Merger  dated  as of
                               October  25,  1997  by and  between  National
                               Australia   Bank   Limited  and  the  Parent,
                               HomeSide,  Inc. (Incorporated by reference to
                               the Definitive  Proxy  Statement of HomeSide,
                               Inc.  filed with the SEC on December 15, 1997
                               (File No. 1-12655)).
                         10    Amendment  dated as of September  30, 1997 to
                               Credit  Agreement  dated  as of  January  31,
                               1997,  among HomeSide  Lending,  Inc. and the
                               Lenders party thereto.
                         12    Computation of Ratio of Earnings to Fixed Charges
                         27    Financial Data Schedule


      (b)   Reports on form 8-K

          HomeSide  Inc.,  the Parent,  filed a report on Form 8-K dated October
25, 1997 to report  under "Item 5. Other  Events"  that  HomeSide  and  National
Australia Bank Limited  entered into an Agreement and Plan of Merger dated as of
October 25, 1997.



                                   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 Lending, Inc.
                                       Registrant)

Date: January 13, 1998                 By: /s/Joe K. Pickett
                                           -----------------
                                           Joe K. Pickett
                                       Chairman and Chief Executive Officer


Date: January 13, 1998                 By: /s/Kevin D. Race
                                           ----------------
                                           Kevin D. Race
                                       Executive Vice President, 
                                       Chief Financial and Accounting Officer

                                       16
<PAGE>


                                                      AMENDMENT


         AMENDMENT,  dated as of September 30, 1997 (this  "Amendment"),  to the
Credit  Agreement,  dated as of  January  31,  1997  (as  amended,  the  "Credit
Agreement"),  among  HomeSide  Lending,  Inc.  ("HomeSide"),  Honolulu  Mortgage
Company,  Inc.  (no  longer  a party to the  Credit  Agreement  pursuant  to its
disposition in accordance with the terms thereof),  the Lenders parties thereto,
NationsBank  of Texas,  N.A., as Syndication  Agent,  The First National Bank of
Boston,  as Collateral  Agent,  and The Chase Manhattan Bank, as  Administrative
Agent (the "Administrative Agent").

                                                W I T N E S S E T H:

         WHEREAS, HomeSide, the Lenders and the Administrative Agent are parties
 to the Credit Agreement; and

         WHEREAS, HomeSide has requested that the Lenders and the Administrative
Agent agree to amend or waive certain  provisions of the Credit  Agreement,  and
the Lenders and the Administrative  Agent are agreeable to such request upon the
terms and subject to the conditions set forth herein;

         NOW THEREFORE,  in consideration of the premises and mutual  agreements
contained herein,  and for other valuable  consideration the receipt of which is
hereby acknowledged,  HomeSide,  the Lenders and the Administrative Agent hereby
agree as follows:

         1.  Definitions.  All terms defined in the Credit  Agreement shall have
such  defined  meanings  when  used  herein  unless  otherwise  defined  herein.
Subsection 1.1 of the Credit Agreement is hereby amended by:

                  (a)  adding,  in  the  appropriate   alphabetical  order,  the
         definition  "`CP Refunding  Borrowing':  a borrowing of Committed Loans
         that is immediately applied to repay Permitted  Commercial Paper at its
         scheduled  maturity in an aggregate  amount equal to the amount of such
         borrowing.";

                  (b) deleting the definition of Adjusted  Consolidated Tangible
Net Worth in its entirety;

                  (c) deleting the definition of Consolidated Tangible Net Worth
         and inserting in lieu thereof the following new definition:

                           "`Consolidated Tangible Net Worth':  at any date, the
                  amount equal to (a) Consolidated Net Worth at such date less 
                  (b) Consolidated Intangibles at such date.";




                                       17
<PAGE>

                  (d)  deleting  the  definition  of MTN  Deduction  Amount  and
         inserting in lieu thereof the following definition:

                  "`MTN Deduction Amount':  at any time, the amount by which (a)
         the  aggregate   principal   amount  of  Permitted   Medium  Term  Debt
         outstanding  at such time exceeds (b) the sum of (i) the  remainder (if
         positive)  of (A)  the  Servicing  Advance  Portion  of the  Tranche  B
         Borrowing  Base at such  time  (determined,  for the  purposes  of this
         definition only,  without giving effect to the first proviso  appearing
         in  subsection  4.1) minus (B) the amount equal to 50% of the Tranche B
         Commitment  Amount at such time plus (ii) 70% of the Appraised Value of
         Ineligible  Servicing (as defined below) at such time (determined,  for
         the purposes of this  definition  only, as if the Ineligible  Servicing
         constituted the Eligible  Servicing  constituted the Eligible Servicing
         Portfolio  as used  in the  definition  of  Appraised  Value).  For the
         purposes of this definition only, "Ineligible Servicing" shall mean, at
         any time,  Direct  Servicing  Rights that would be included in Eligible
         Servicing  Portfolio  but for failing (x) to satisfy  clause (b) of the
         definition thereof or (y) to constitute Non-Recourse Servicing Rights."

                  (e) adding the phrase  "increased  or"  immediately  after the
         phrase "such amount may be" in the  definition of Tranche A Commitment;
         and

                  (f)  adding to the  definition  of  Tranche B  Commitment  the
         phrase  "increased  or"  immediately  after the phrase "such amount may
         be".

         2.  Amendment to Section 2. The Credit  Agreement is hereby  amended by
adding the following new subsection 2.12 to the end of Section 2:

                  "2.12 Increase of Revolving Credit  Commitments.  (a) HomeSide
         may from time to time, by notice to the Administrative  Agent,  request
         that the  Tranche  A and  Tranche  B  Commitments  be  increased  by an
         aggregate  amount that is not less than $10,000,000 and will not result
         in the aggregate  amount of the Commitments  for all Lenders  exceeding
         $3,000,000,000 after giving effect thereto, provided that such increase
         shall be allocated  proportionally  among the Tranche A Commitments and
         Tranche B Commitments  such that, after giving effect to such increase,
         the total  amount of each of the  Tranche A  Commitments  and Tranche B
         Commitments  bears  the same  relative  proportion  immediately  before
         giving effect thereto.  Upon receipt of such notice the  Administrative
         Agent will seek the agreement of one or more existing or new Lenders to
         increase or, in the case of new Lenders,  provide, its or their Tranche
         A Commitments and Tranche B Commitments in an aggregate amount equal to
         the increase so requested by such Borrower.

                                       18
<PAGE>

                  (b)  If one or  more  of the  Lenders  shall  have  agreed  to
         increase its or their Tranche A  Commitments  and Tranche B Commitments
         pursuant to a request made as described in the foregoing clause (a) (it
         being  understood  that no Lender shall have any obligation to agree to
         any such increase of its  Commitments) in an aggregate  amount not less
         than $10,000,000, such increases and such new Tranche A Commitments and
         Tranche B Commitments  shall become effective on a date mutually agreed
         upon among the Administrative Agent, HomeSide and the Lenders providing
         such  increase  and/or such new  Commitments  and shall be  implemented
         pursuant to documentation consistent herewith and otherwise in form and
         substance   reasonably   satisfactory  to  the  Administrative   Agent,
         providing, among other things, for adjustments to cause Tranche A Loans
         and the Tranche B Loans of each Lender to  correspond  ratably to their
         respective  Tranche A Commitment  Percentages  and Tranche B Commitment
         Percentages,  as  applicable,  after  giving  effect  to such  increase
         (including,   without  limitation,   by  providing  for  prepaying  and
         reborrowing all then outstanding Loans of the affected Tranches)."

         3. Amendments to Section 4. (a) Subsection 4.1 of the Credit  Agreement
is hereby  amended (i) by deleting  clauses (c) and (d) thereof and inserting in
lieu thereof the following:

                  "(c) (i) for Eligible Mortgage-Backed  Securities,  99% of the
         lesser of (A) the face amount thereof and (B) the  Applicable  Take-Out
         Price  multiplied  by the face  amount  thereof,  and (ii) cash or Cash
         Equivalents  pledged as Collateral in  accordance  with the  applicable
         Borrower  Security  Agreement  and  held  in  the  Settlement  Accounts
         referred to in such Borrower Security Agreement; and

                  (d) (i) 90% of Eligible P&I Advance  Receivables  and (ii) 85%
         of Eligible Paid-in-Full Buyout Advance Receivables;".

                  (b) Subsection  4.2 of the Credit  Agreement is hereby amended
by  deleting  clause  (g) of the  first  paragraph  of  such  subsection  and by
inserting the following in its place;

                  "(g) 70% of (i) the Appraised Value of the Eligible  Servicing
         Portfolio  at such time  minus  (ii) the MTN  Deduction  Amount at such
         time;".

                  (c) Subsection  4.2 of the Credit  Agreement is hereby further
amended (i) by deleting  the phrase  "90% of Eligible  P&I Advance  Receivables"
from clause (a) thereof and inserting in lieu thereof the phrase "[Intentionally
Omitted]" and (ii) by deleting the phrase "85% of Eligible  Paid-in-Full  Buyout
Advance  Receivables"  from clause (f) thereof and inserting in lieu thereof the
phrase "[Intentionally Omitted]".

                  (d) Subsection  4.3 of the Credit  Agreement is hereby amended
by  adding,  immediately  before  the  period at the end of the  proviso  to the
definition of "Eligible Servicing Portfolio" the following new proviso:

                                       19
<PAGE>

                  "; provided  further,  that,  notwithstanding  the  applicable
         provisions of the foregoing or of the definitions of "Direct  Servicing
         Rights" or  "Non-Recourse  Servicing  Rights" to the contrary,  for the
         purposes of determining  the Tranche B Borrowing Base under  subsection
         4.2(g) at any time,  the value that would be attributed to servicing in
         respect of Mortgage  Loans owned by HomeSide  and not  serviced for any
         third  party  if  such   servicing   was  pursuant  to  contracts   and
         Acknowledgment  Agreements  with Approved  Investors in respect thereof
         shall be deemed to be included in the Eligible Servicing  Portfolio for
         the  purposes  of clause  (g) of  subsection  4.2(g) so long as (i) all
         other  applicable  requirements for inclusion  therein,  other than the
         existence of servicing  contracts and  Acknowledgment  Agreements  with
         Approved  Investors in respect  thereof,  are  satisfied  and (ii) such
         Mortgage  Loans are eligible for sale to FNMA or FHLMC or for inclusion
         in  a  pool  of  Mortgage   Loans   underlying   GNMA   Mortgage-Backed
         Securities".

         4. Amendment to Section 6. Subsection 6.2(a) of the Credit Agreement is
hereby  amended  by  inserting  immediately  after the words  "such  Loans"  the
phrase",   other  than,   in  the  case  of  a  CP  Refunding   Borrowing,   the
representations  and warranties set forth in subsection  5.2,  5.3(f),  5.6, the
first sentence of subsection 5.7 or the last sentence of subsection 5.9,".

         5.  Amendment  to  Subsection  8.1.  (a)  Subsection  8.1 of the Credit
Agreement is hereby  amended by deleting  clause (c) thereof in its entirety and
inserting in lieu thereof the phrase "[Intentionally Omitted]".

                  (b) Subsection  8.1 of the Credit  Agreement is hereby further
amended by  deleting  clause (a)  thereof  and  inserting  in lieu  thereof  the
following:

                  (a)  Maintenance of  Consolidated  Tangible Net Worth.  Permit
         Consolidated  Tangible  Net Worth at any date to be less than an amount
         equal to the sum of (i) an amount equal to 80% of Consolidated Tangible
         Net Worth as at February  28, 1997,  plus,  (ii) an amount equal to the
         excess of (A) the aggregate amount of net proceeds  received during the
         period from  February 28, 1997  through such date by Holdings  from the
         issuance of Capital  Stock  other than to Sponsors  over (B) the amount
         thereof  applied to prepay or redeem the  Holdings  Notes plus (iii) an
         amount  equal to 50% of the sum of  Consolidated  Net  Income  for each
         fiscal quarter for which Consolidated Net Income is positive during the
         period from February 28, 1997 through the last day of the most recently
         ended  fiscal  quarter of HomeSide  less (iv) the amount of  Restricted
         Payments  actually made by HomeSide as permitted  under  subsection 8.9
         during the period  from  February  28, 1997  through  such date (to the
         extent such Restricted  Payments were not deducted in determining  such
         Consolidated Tangible Net Worth)."

                  (c) Subsection  8.1 of the Credit  Agreement is hereby further
amended by deleting the term "Adjusted  Consolidated Tangible Net Worth" in each
place where it appears in clause (b) thereof and  inserting  in lieu  thereof in
each such place the term "Consolidated Tangible Net Worth".

         6. Amendment to Subsection 8.2.  Subsection 8.2 of the Credit Agreement
is hereby  amended by inserting the caption (i) before the word  "intra-day"  at
the  beginning  of clause (g)  thereof  and  inserting  at the end of clause (g)
thereof the following:

                                       20
<PAGE>

         "and (ii) intra-day  overdrafts or drawings against  uncollected funds,
         and  obligations   under   agreements  that  HomeSide  or  any  of  its
         Subsidiaries  must enter into in  anticipation  of such  overdrafts  or
         drawings,  in each case arising in the  ordinary  course of business of
         servicing  mortgages,  so long  as such  overdraft  or  drawing  is not
         outstanding for more than two Business Days".

         7. Representations; No Default. On and as of the date hereof, and after
giving effect to this Amendment,  HomeSide confirms, reaffirms and restates that
the  representations  and  warranties  set  forth  in  Section  5 of the  Credit
Agreement  and in the other Loan  Documents are true and correct in all material
respects,  provided that the references to the Credit Agreement therein shall be
deemed to be references to this Amendment and to the Credit Agreement as amended
by this Amendment.

         8. Conditions to  Effectiveness.  This Amendment shall become effective
on and as of  the  date  that  the  Administrative  Agent  shall  have  received
counterparts of this Amendment, duly executed and delivered by a duly authorized
officer of each of the Borrowers,  the  Administrative  Agent,  and the Required
Lenders.

         9. Limited  Amendment.  Except as expressly amended herein,  the Credit
Agreement shall continue to be, and shall remain, in full force and effect. This
Amendment  shall  not  be  deemed  to  be a  waiver  of,  or  consent  to,  or a
modification  or  amendment  of,  any  other  term or  condition  of the  Credit
Agreement or any other Loan  Document or to prejudice  any other right or rights
which the Lenders may now have or may have in the future under or in  connection
with the Credit  Agreement or any of the  instruments or agreements  referred to
therein, as the same may be amended form time to time.

         10. Counterparts.  This Amendment may be executed by one or more of the
parties  hereto  in  any  number  of  separate  counterparts  and  all  of  said
counterparts  taken  together  shall be  deemed to  constitute  one and the same
instrument.

         11.  GOVERNING LAW. THIS AMENDMENT  SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.




                                       21
<PAGE>
         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered by their  respective duly  authorized  officers as of the
date first above written.

HOMESIDE LENDING, INC.                     THE CHASE MANHATTAN BANK, as
                                            Administrative Agent and as
                                            a Lender


By:  s/Debra F. Watkins                    By:s/Signature
       Title:  Senior Vice President            Title:  Vice President

By:  s/Kevin D. Race
        Title:  Executive Vice President
                 and Chief Financial 
                 Officer

THE FIRST NATIONAL BANK OF BOSTON,         NATIONSBANK OF TEXAS, N.A., as
  as Collateral Agent                       Syndication Agent and as a Lender

By:  s/David L. Hall                       By: s/Warren
       Title:                                    Title:  Senior Vice President

MORGAN  GUARANTY  TRUST COMPANY            BANK OF AMERICA  NATIONAL  TRUST 
 OF NEW YORK, as Senior Managing            AND SAVINGS  ASSOCIATION, as a 
 Agent and as a Lender                      Managing Agent and as a Lender
  
By:  s/Seija K. Hurskainen                 By:  s/Robert J. McCollom
       Title:  Vice President                     Title:  Vice President

CANADIAN IMPERIAL BANK OF                  CREDIT LYONNAIS, NEW YORK
 COMMERCE, as a Managing Agent and          BRANCH, as a Managing Agent and
 as a Lender                                 as a Lender

By:  s/Gerald J. Girardi                   By:  s/Renaud Diherbes
       Title:  Director, CIBC Wood Gundy          Title:  Senior Vice President
                Securities Corp., as 
                Agent

UNION BANK OF SWITZERLAND,                 WESTDEUTSCHE LANDESBANK
 NEW YORK BRANCH, as a Managing             GIROZENTRALE, as a Managing Agent
 and as a Lender                            and as  Lender
                                       22

<PAGE>

By:  s/Robert Mendeles                     By:  s/Kenneth R. Crespo
       Title:  Director                           Title:  Vice President

By:  s/Didier Magloire                     By:  s/David J.
        Title:  Director                          Title:  Vice President

THE BANK OF NEW YORK, as a Managing        BANKERS TRUST COMPANY, as a
 Agent and as a Lender                      Co-Agent and as a Lender

By:  s/Signature                           By:  s/John O'Rourke
       Title:  Vice President                     Title:  Managing Director

BANQUE NATIONALE DE PARIS, as a            MELLON BANK, N.A., as a Co-Agent
 Co-Agent and as a Lender                   and as a Lender

By:  s/Riva L. Howard                      By: s/Signature
       Title:  Vice President                    Title:  Vice President

By:  s/Signature
       Title:

COMMERZBANK AKTIENGESELLSCHAFT,            FLEET BANK, N.A., as a Co-Agent and
 ATLANTA AGENCY, as Co-Agent and as         as a Lender
 a Lender

By:  s/Signature                           By: s/Signature
       Title:                                    Title:

By:  s/Signature
       Title:  Assistant Vice President

THE NATIONAL BANK OF KUWAIT                FIRST UNION NATIONAL BANK OF
                                            NORTH CAROLINA

By:  s/Muhannad Kamal                      By: s/Signature
       Title:  Executive Manager                 Title:  Vice President

By:  s/Robert J. McNeill
       Title:  Deputy Division Manager

                                       23
<PAGE>
THE FUJI BANK, LIMITED, NEW YORK           BANK OF TOKYO - MITSUBISHI
 BRANCH                                     TRUST COMPANY

By:  s/Signature                           By: s/Signature
       Title:                                          Title:

THE SUMITOMO BANK, LIMITED                 SUNTRUST BANK, INC.

By:  s/Masayuki Fukushima                  By: s/Signature
       Title:  Joint General Manager             Title:  First Vice President


THE TOKYO TRUST & BANKING CO., LTD.        THE INDUSTRIAL BANK OF JAPAN,
                                            LIMITED, ATLANTA AGENCY

By:  s/Signature                           By: s/Signature
       Title:                                    Title:

PNC BANK KENTUCKY, INC.                    THE SAKURA BANK, LIMITED
                                            ATLANTA AGENCY

By:  s/Signature                           By: s/Signature
       Title:  Vice President                    Title:

COMPASS BANK                               BANQUE PARIBAS

By:  s/Johanna Duke Paley                  By: s/Signature
       Title:  Senior Vice President             Title:

COMERICA BANK                              BANQUE FRANCAISE, DU, COMMERCE
                                            EXTEDRIEUR

By:  s/Randy S. Banker                     By: s/Signature
       Title:  Account Officer                   Title:  First Vice President



                                       24
<PAGE>
                                           By: s/Signature
                                                 Title:  Vice President

THE DAI-ICHI KANGYO BANK, LIMITED          DG BANK DEUTSCHE GENOSSENSCHAFTSBANK,
 ATLANTA AGENCY                             CAYMAN ISLAND BRANCH

By:  s/Signature                           By: s/Signature
       Title:                                    Title:  First Vice President

                                           By:  s/Karen A. Brinkman
                                                  Title:  Vice President

THE FIRST NATIONAL BANK OF CHICAGO         LTCB TRUST COMPANY

By:  s/Signature                           By: s/Signature
       Title:  First Vice President              Title:  Senior Vice President

NATIONAL CITY BANK OF KENTUCKY             KREDIETBANK N.V., GRAND
                                            CAYMAN BRANCH

By:  s/Signature                           By: s/Signature
       Title:                                    Title:

ALLIED IRISH BANK                          PT. BANK NEGARA INDONESIA
                                            (PERSERO), TBK

By:  s/Signature                           By: s/Signature
       Title:                                    Title:

GUARANTY FEDERAL                           CAISSE NATIONALE DE CREDIT
                                            AGRICOLE

By:  s/James B. Clapp                      By:  s/Dean Balice
       Title:  Assistant Vice President           Title:  Senior Vice President
                                                           Branch Manager

THE SUMITOMO TRUST AND BANKING             BANCA CRT S.p.A.
 CO LTD., LOS ANGELES AGENCY


                                       25
<PAGE>
By:  s/Signature                           By:  s/J. Slade Carter, Jr.
       Title:                                     Title:  Vice President

                                           By: s/Robert P. DeSantes
                                                 Title:  First Vice President
                                                          Head of Corporate
                                                          Banking

                                       26
<PAGE>



       EXHIBIT 12 - COMPUTATION OF THE RATIO OF EARNINGS TO FIXED CHARGES
                          (Dollar amounts in thousands)


The  following  table  sets  forth the ratio of  earnings  to fixed  charges  of
HomeSide  Lending,  Inc. for the three months ended November 30, 1997, the three
months ended  November 30, 1996, the nine months ended November 30, 1997 and the
period from March 16, 1996 to November 30, 1996.  The ratio of earnings to fixed
charges is computed by dividing net fixed charges  (interest expense on all debt
plus the interest portion of rent expense) into earnings before income taxes and
fixed charges.
<TABLE>
<CAPTION>
                                                                                             For the period
                                    For the three      For the three      For the nine       from March 16,
                                    Months Ended       Months Ended       Months Ended          1996 to
                                    November 30, 1997  November 30, 1996  November 30, 1996  November 30, 1997           
                                    -----------------  -----------------  -----------------  -----------------                 
<S>                                 <C>                <C>                <C>                <C>

Earnings before income taxes        $         37,378    $        27,738   $        107,549   $         64,341
                                    -----------------  -----------------  -----------------  -----------------
Interest expense                              23,349             16,140             61,222             46,416
Interest portion of rental                                                                              1,110
 expense                                         370                440              1,017
                                    -----------------  -----------------  -----------------  -----------------
Fixed charges                                 23,719             16,580             62,239             47,526
                                    -----------------  -----------------  -----------------  -----------------
Earnings before fixed charges                 61,097             44,318            169,788            111,867
                                    -----------------  -----------------  -----------------  -----------------
Fixed Charges:

Interest expense                              23,349             16,140             61,222             46,416
Interest portion of rental
 expense                                         370                440              1,017              1,110
                                    -----------------  -----------------  -----------------  -----------------
Fixed charges
                                    $         23,719     $       16,580   $         62,239   $         47,526
                                    -----------------  -----------------  -----------------  -----------------
Ratio of earnings to fixed
 charges                            $           2.58   $           2.67   $           2.73   $           2.35
                                                                                      
                                    =================  =================  =================  =================
</TABLE>

<TABLE> <S> <C>

<ARTICLE>                                  5
<CIK>                                      0001031258
<NAME>                                     HomeSide Lending, Inc.
<MULTIPLIER>                               1
<CURRENCY>                                 U.S. Dollars
                                           
<S>                                        <C>
<PERIOD-TYPE>                              3-MOS
<FISCAL-YEAR-END>                          FEB-28-1998
<PERIOD-START>                             SEP-01-1997
<PERIOD-END>                               NOV-30-1997
<EXCHANGE-RATE>                            1
<CASH>                                                  16,590
<SECURITIES>                                                 0
<RECEIVABLES>                                          252,722
<ALLOWANCES>                                                 0
<INVENTORY>                                                  0
<CURRENT-ASSETS>                                     3,457,651   
<PP&E>                                                  35,414
<DEPRECIATION>                                               0
<TOTAL-ASSETS>                                       3,493,065
<CURRENT-LIABILITIES>                                2,059,460
<BONDS>                                                770,671
                                        0
                                                  0
<COMMON>                                                     0
<OTHER-SE>                                             662,934
<TOTAL-LIABILITY-AND-EQUITY>                         3,493,065
<SALES>                                                      0
<TOTAL-REVENUES>                                        75,619
<CGS>                                                        0
<TOTAL-COSTS>                                                0
<OTHER-EXPENSES>                                        38,241
<LOSS-PROVISION>                                             0
<INTEREST-EXPENSE>                                           0
<INCOME-PRETAX>                                         37,378
<INCOME-TAX>                                            14,577
<INCOME-CONTINUING>                                     22,801
<DISCONTINUED>                                               0
<EXTRAORDINARY>                                              0
<CHANGES>                                                    0
<NET-INCOME>                                            22,801
<EPS-PRIMARY>                                                0
<EPS-DILUTED>                                                0
        

</TABLE>


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