Fed Vice Chair for Supervision Michelle Bowman, appearing at a Senate Banking Committee hearing on Feb. 26, confirmed that regulators are expected to release an updated Basel III proposal at the end of March.

But while this is the chief goal, Bowman hinted that the deadline might need to be extended.

She told lawmakers that officials at the Fed, Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation have reached a consensus on the reproposal.

Basel III is a regulatory blueprint crafted in the fallout of the global financial crisis of 2008. It features a number of capital reforms and tighter requirements for how large U.S. banks measure credit, market, and operational risk.

In recent months, Bowman has teased that Basel III has retooled capital requirements, a move that could bolster lending by traditional lenders, particularly in the mortgage market.

"We're very focused, as we were thinking about the Basel approach, in ways that we could right-size and recalibrate the approach for residential mortgage lending so that we could encourage the banks to get back into the mortgage business," Bowman told senators.

"We're refocusing our supervision in a laser focus on material financial risks."

This comes shortly after Bowman suggested new mortgage capital rules for U.S. banks would be integral to the Basel III proposal.

Appearing at an American Bankers Association event on Feb. 16, Bowman stated that one change could tie a mortgage's risk weight to its loan-to-value-ratio, effectively removing the one-size-fits-all approach. Another update could remove a provision requiring that banks deduct mortgage?servicing assets from regulatory capital.

For years, critics have argued that the original Basel III proposal would have reduced lending due to higher capital mandates and would have led to higher funding costs for borrowers.

Proponents say higher capital requirements are necessary to prevent a similar financial crisis in the future.

But while the focus has been on Basel, Bowman argued that other issues also need to be addressed, including the Consumer Financial Protection Bureau's stringent requirements and the sizable penalties banks face if they make mistakes on mortgage applications.

"I think it's important that we think about this in a broader manner and holistically as we approach thinking about banks getting back into the mortgage space," Bowman said.

Support for Homeownership

Overall, Bowman noted, the upcoming reproposal could spark affordable homeownership, ensure banks of all sizes come off the sidelines, and support market liquidity.

"My approach is to calibrate the new framework from the bottom up, rather than reverse engineer changes to achieve predetermined or preconceived outcomes to capital requirements," she stated.