Attorney General Eric Holder was expected to hold a new conference Monday to announce terms of the settlement.
Citigroup confirmed the deal early Monday. The banking giant will take a $3.8 billion charge in the second quarter in connection with the settlement. Citi will release its earnings for the period this morning.
Citigroup CEO Michael Corbat said in a statement that the federal settlement with the Justice Department, state attorneys general and the FDIC resolves all pending civil investigations into how the company packaged and sold mortgage securities.
The $7 billion would include $4 billion in cash to the Justice Department, $2.5 billion in consumer relief, more than $200 million to the Federal Deposit Insurance Corp. and just under $300 million to settle investigations by five states, the Reuters news agency reported, citing sources familiar with the negotiations.
The payment for consumer relief will include financing for the construction and preservation of affordable housing and principal reduction for mortgage loans, Citi said. The bank has agreed to offer that relief by the end of 2018.
Citigroup shares rose 3.6 percent, to $47, in pre-market trading.
Citigroup becomes the second big Wall Street bank to settle a federal probe into its mortgage practices in the years leading up to the housing crash. In November, JPMorgan Chase (JPM) agreed to a $13 billion settlement, the largest ever reached between the government and a U.S. corporation.
Although paying a large fine would sting in the short term, settling the case would lift a cloud hanging over Citigroup, the nation's third-biggest bank by assets. After the housing crash, the company had to accept $45 billion in cash under a federal bailout and billions more in loan guarantees, the most of any big bank. Like other large financial firms, it became a poster child for Wall Street abuses.
Citi had been negotiating a settlement in order to prevent the Justice Department from filing suit under the Financial Institutions Reform, Recovery and Enforcement Act of 1989, which would have allowed the government to present a criminal case against the bank.
CBS News reported last week that the Justice Department had rejected an initial offer by Citi to pay $4 billion and was pressing for a figure closer to $10 billion.
Frustrated by the lack of progress in negotiations, the Justice Department informed the financial giant in June that it was going to file suit the very next day, according to reports Sunday night in The New York Times and Wall Street Journal.
The Justice Department decided to put off action, however, because of the capture of Ahmed Abu Khatallah, a key suspect in the 2012 attack on the U.S. consulate in Benghazi, Libya, that killed Ambassador J. Christopher Stevens and three other Americans.
The government didn't want news of the capture to overshadow any announcement of a suit against Citigroup, according to the reports.
Copyright 2015 Nexstar Broadcasting, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.