Morgan Stanley contacted potential buyers of Saxon Capital Inc., a mortgage servicer the company bought in 2006, according to a person briefed on the plans.

Morgan Stanley is hoping to reach a deal by the end of the year, said the person, who would not be named because an agreement had not been reached. Morgan Stanley did not comment.

It bought the Glen Allen, Va., servicer for $706 million as the investment bank sought a mortgage issuer and servicer to provide home loans that it packaged into securities.

Morgan Stanley took a $700 million writedown in the fourth quarter of 2008 related to a few businesses it owned, with most of the charge coming from Saxon.

In May, Saxon agreed to pay $2.35 million to resolve a lawsuit alleging it improperly foreclosed on 17 service members from 2006 to 2009. The foreclosures violated the Servicemembers Civil Relief Act, which was enacted to shield deployed military personnel from financial stress, according to the Justice Department.

In June, Goldman Sachs Group Inc. agreed to sell Litton Loan Servicing LP to Ocwen Financial Corp. for $263.7 million in cash. Ocwen also agreed to pay about $337.4 million to retire some of Litton's debt.

Morgan Stanley considered buying New Century Financial Corp., the subprime mortgage lender that filed for bankruptcy in April 2007, before acquiring Saxon in 2006, Chairman John Mack said in a November 2010 interview released this year by the Financial Crisis Inquiry Commission.

The New York Post reported the possible Saxon sale Wednesday.

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