In his July 2 Point of View piece, Jerry Hartzell was wrong to say that the mortgage industry is entirely to blame for the housing slump. The industry has made major mistakes and is now paying dearly for them (as are their investors), but what of the borrowers?

In many cases the borrower now in default has lived in a house at a cost far below its rental cost and was set to gain big if the house went up in value. The borrower is suffering hardship, but is not a victim, just unlucky.

Hartzell's proposal that bankruptcy laws be extended to homeowners in default is fine, but only for new loans. Applying it retroactively is forcing a renegotiation of a contract that was freely made in the absence of such laws. Changing the terms is, in most cases, impossible because these loans have been securitized and sold off.

At the end of the day you can't expect to live in a house you can't afford at a reduced cost with the potential of a large return and not face some risk -- markets just don't work like that. Hartzell would do well to appreciate that fact.

Richard Warr

Associate Professor of Finance

N.C. State University

Raleigh