WASHINGTON — The centuries-old question about a tree falling in the forest best encapsulates the debate over the latest draft of the "qualified residential mortgage" proposal: If regulators create a risk retention requirement that applies to relatively few loans, does it exist at all?

Under the Dodd-Frank Act, lenders were supposed to retain at least 5% of the risk of any loan they securitized. But the law mandated that regulators also provide an exception to this standard, one that — by all accounts — was supposed to be narrow.

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