U.S. attorney investigating Citigroup mortgage arm

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NEW YORK (Reuters) - Citigroup Inc <C.N> said in a regulatory filing on Friday that the Justice Department is examining its mortgage business.

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The bank said the civil division of U.S. Attorney for the Southern District of New York is examining Citi's mortgage origination, servicing, sale and securitization practices.

"Citigroup is cooperating fully with this inquiry," the bank said in a 10-Q filing with the Securities and Exchange Commission.

Manhattan U.S. Attorney Preet Bharara has been examining the practices of large mortgage servicers for evidence of potential wrongdoing.

In May, his office sued Deutsche Bank AG <DBKGn.DE> for more than $1 billion, accusing the German bank of repeatedly lying to obtain federal mortgage guarantees. Deutsche Bank called the charges "unreasonable and unfair" at the time.

In that case, Bharara used the False Claims Act, a provision that prevents companies from taking federal funds under false pretenses and he suggested his office might be investigating the activities other financial firms under the same law.

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Citi also said it is one of several large mortgage servicers in talks with the Justice Department, state attorneys general and other federal agencies regarding a settlement for mortgage practices. Citi said the proposals under discussion would entail both monetary and non-monetary consideration.

(Reporting by Lauren Tara LaCapra; editing by Andre Grenon)