U.S. financial regulators looking to ease mortgage norms: WSJ

U.S. financial regulators are planning to relax a key provision that requires banks to withhold a portion of the mortgage securities they sell to investors, the Wall Street Journal reported, citing people familiar with the matter.

The Federal Reserve and Federal Deposit Insurance Corp are among regulators considering loosening rules governing mortgage-backed securities, but nothing has been finalized yet, the Journal said.

Changing such rules would mean unwinding the regulations that came into effect under the 2010 Dodd-Frank law, which mandates that banks should retain 5 percent of all mortgage-backed securities issued without government backing.

The change would represent a victory for banks and consumer advocates that opposed the new rules and argued that they would restrict lending and do little to make the financial system safer, the newspaper said.

(Reporting by Pallavi Ail in Bangalore; Editing by Eric Walsh)