Washington Mutual ( WM) said it will buy stock in HomeSide Lending, the U.S. mortgage unit of National Australia Bank ( NAB), for about $1.3 billion in cash. As part of the agreement, Washington Mutual will also assume $735 million of HomeSide's outstanding medium-term notes.

The deal is expected to be completed by early fourth-quarter 2002. Washington Mutual will then get 1.4 million of HomeSide's customers, its mortgage servicing portfolio, related hedges and other assets.

Currently, Washington Mutual subservices the mortgage loans in HomeSide's servicing portfolio. The company's strategy in making the $1.3 billion deal was to permanently add mortgage services to the bank's roster, thereby eliminating the extra service fees paid to HomeSide.

Washington Mutual expects the acquisition to slightly impact its 2002 earnings per share. The company plans to sell excess mortgage services it will not use and use that money to buffer any serious "financial exposure."

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