WASHINGTON -- The Justice Department is finalizing a lawsuit against Citigroup over the bank’s sale of residential mortgage-backed securities after negotiations to resolve the matter broke down.

Two people with direct knowledge of the matter say negotiations between the Justice Department and the bank fell apart this week. They said a lawsuit from the federal government could be filed as early as next week.

The people spoke on condition of anonymity because they weren’t authorized to be quoted by name when discussing a complaint that has not yet been filed.

One of the people said the bank offered to pay less than $4 billion to settle the investigation, substantially less than what the Justice Department is demanding.