The mortgage unit of NationsBank Corp. said Monday that it has agreed to buy an Arizonabased mortgage servicing business for about $85 million.

The purchase, from Express America Holdings, will boost NationsBank's servicing portfolio by more than 20%, to $37.5 billion. It also provides NationsBank with a facility to handle growth in servicing.

The Charlotte, N.C.-based superregional is the latest in a series of commercial banks to announce mortgage banking acquisitions this year. The banks have come to view residential mortgage banking as a key way to build fee income and forge closer ties with consumers. Dallas-based NationsBanc Mortgage signaled its intent to grow in June when it hired industry star Andrew D. Woodward Jr. as president. He had been chairman of Fleet Mortgage Group, where he led a major buildup in originations and servicing.

NationsBanc Mortgage was the nation's 17th-largest mortgage servicer at the end of last year, according to an American Banker survey. The acquisition should move it close to the top 10.

Rumors of the transaction have been widespread in recent weeks, and the shares of Express America climbed $2 a share, to $8, over the last two weeks.

The price tag on the deal was in line with that of other recent transactions, with the servicing rights apparently fetching about 1.25% of the amount of mortgages covered.

Meanwhile, mortgage stocks were strong across the board last week, though not quite as vigorous as the stock market generally. The Dow climbed 3.35% last week, to 3881.05.

Mortgage insurers were unusually strong, with CMAC Investment Corp. climbing $1.875, to $29.125, after a gain of $1.125 in the preceding week, and MGIC investment Corp. gaining 75 cents, to $30.625, after surging by $2.125 a week earlier.

Investors have been enthusiastic about mortgage insurers because of the prospect of steady increases in the number of low-down-payment mortgages issued despite the general originations slump.

Gary Gordon, an analyst at PaineWebber Inc., projects this growth at about 10% a year for the next five years.

Prospects of stability in long-term rates, which would keep the home buying surge alive, could also be a factor in the insurers' strength.

The list of publicly traded mortgage banking companies is shrinking fast. American Residential is being acquired by Chase Manhattan; Arbor National and Lomas Financial have put themselves on the block; North American is said to be evaluating bids; and virtually every other company has been reported to be a potential takeover target.

Even Directors Mortgage, privately held by a trust, is reportedly a takeover candidate.

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