A vehicle includes a powertrain having an electric machine configured to selectively apply regenerative torque to cause deceleration in response to braking demand; the powertrain further including a torque converter configured to decouple the electric machine from wheels of the vehicle. The vehicle is also provided with a controller programmed to, during a regenerative braking event, receive a signal defining a regenerative torque limit, and in response to a fault condition associated with the regenerative torque limit, generate a replacement regenerative torque limit based upon a torque converter open speed to decrease roughness during transitions into and out of regenerative braking.