Regulators adopting new rules on banks' risk in mortgage bonds, dropped down payment condition

Lifestyle and Budget Associated Press

Federal regulators are proceeding with new rules that ease guidelines for banks selling mortgage securities and could mean fewer borrowers will need to make hefty down payments.

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The Securities and Exchange Commission voted 3-2 Wednesday to adopt the rules, which six federal agencies have been working on since 2011. Three other agencies adopted the rules Tuesday, and the Federal Reserve has scheduled a vote for Wednesday afternoon.

The rules govern the amount of risk banks must take on when they package and sell mortgage securities in a multitrillion-dollar market. In the final rules, the regulators have dropped a key requirement: a 20-percent down payment from the borrower if a bank didn't hold at least 5 percent of the mortgage securities tied to those loans on its books.