Banks are sparring over looming U.S. mortgage-lending rules that could raise costs for millions of borrowers.

As regulators race to meet an April deadline for issuing the regulations, triggered by last summer's Dodd-Frank financial-overhaul law, the mortgage industry is sharply divided over how much borrowers should be required to put up as a down payment for loans that are classified as less risky by regulators.

Wells Fargo & Co., the nation's largest mortgage lender, has asked U.S. regulators to set a down-payment standard of 30% on mortgages that wouldn't have to meet a new requirement that banks retain 5% of a loan if it is securitized. The so-called risk-retention requirement is aimed at preventing future housing meltdowns because lenders could face steeper losses if their loans go bad.

During the real-estate boom, it was common for home buyers to put down little or nothing. Many lenders now require buyers to put down about 20% for home loans that don't require mortgage insurance.

If regulators go along with the San Francisco bank's proposal, mortgage lenders still could make loans with down payments lower than 30%. But those loans would be more costly for the banks because of the risk-retention requirement. Lenders likely would pass those costs along to borrowers in the form of higher interest rates.