Federal regulators are seeking public comment on their new Basel III capital proposals and there are hints they may be changing their stance on private mortgage insurance when it comes to calculating risk weightings for residential mortgages.

In an outline of the Basel III approach released in June, regulators based the risk weightings mainly on the loan-to-value ratios of the first and second liens. Banks could “not recognize private mortgage insurance for purposes of calculating the LTV ratio,” according to a Basel III capital proposal.

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