WASHINGTON — Citigroup will pay $7 billion to settle an investigation into risky subprime mortgages, the type that helped fuel the financial crisis.

The agreement announced this morning comes weeks after talks between the sides broke down, prompting the government to warn that it would sue the New York investment bank. The bank had offered to pay less than $4 billion, a sum substantially less than what the Justice Department was asking for.

The settlement stems from the sale of securities made up of subprime mortgages, which fueled both the housing boom and bust that triggered the Great Recession at the end of 2007.

Citigroup and other banks downplayed the risks of subprime mortgages when packaging and selling them to mutual funds, investment trusts, pensions, as well as other banks and investors.