UPDATE 1-Federal Reserve fines Citigroup $8.6 mln for faulty mortgage document practices

(Adds Citi statement, further details)

WASHINGTON, Aug 10 (Reuters) - The U.S. Federal Reserve said on Friday it had fined Citigroup $8.6 million over shoddy mortgage documentation practices at a subsidiary.

The Fed said that in 2015, CitiFinancial, a bank subsidiary, mishandled customer files as it was preparing to wind down its mortgage servicing business.

Specifically, the Fed said the bank was deficient in its treatment of certain mortgage-related affidavits as the subsidiary prepared to wind down its mortgage servicing business. Employees made claims about the ownership of certain mortgage notes in affidavits without being in a position to actually know the claims were accurate, the Fed said.

The regulator said the problem occurred in 2015 and was corrected, and CitiFinancial exited that line of business in 2017.

“Citi is pleased to have resolved these matters. The affidavit issue was self-reported, swiftly corrected and did not affect homeowners,” said Drew Benson, a bank spokesman.

The Fed also said it was terminating a separate 2011 enforcement action against Citigroup on a separate residential mortgage loan servicing matter, citing sustainable improvements by the bank. (Reporting by Pete Schroeder; Editing by Bernadette Baum)