The qualified residential mortgage standards proposed Tuesday are too narrow and would only push more business toward the government, two secondary market trade groups said. Lenders and securitizers will be exempt from retaining 5% of the risk only on mortgages that meet the QRM standards. Regulators proposed Tuesday that a QRM would require 20% down among other guidelines. However Fannie Mae, Freddie Mac and the Federal Housing Administration would be exempt from having to meet these standards. American Securitization Forum Executive Director Tom Deutsch said the QRM rules are "extremely rigid" and would further prolong the government's 95% mortgage market dominance. "Drawing private capital out of the mortgage finance system, rather than encouraging its entry, will only serve to further depress home prices nationwide and keep first-time homebuyers out of a housing market suffering from a severe oversupply of available homes," Deutsch said. Richard Dorfman, managing director and head of the Securities Industry and Financial Markets Association echoed Deutsch's sentiments said lower-income homeowners may be priced out of the market because of the 20% down payment. "SIFMA notes that the QRM definition, which provides an exclusion from risk retention requirements for certain lower-default risk mortgage loan pools, will have a significant impact on the availability and cost of mortgages for consumers," Dorfman said. "It is essential that regulators implement an effective standard, which strikes a balance between credit quality and availability, while not making mortgage credit unaffordable. As proposed today, the QRM definition appears to be narrowly crafted." However, Federal Deposit Insurance Corp. Chairman Sheila Bair defended the proposal, saying that the QRM does not have to dominate the market and will instead take up only a "small slice." "The QRM is the exception, not the rule, and as such, I believe should be narrowly drawn," Bair said. "Properly aligned economic incentives are the best check against lax underwriting." Write to Jon Prior. Follow him on Twitter @JonAPrior.