Financial institutions' decisions sometimes make no sense to me.

One instance comes from mortgage financing. Borrowers with shaky credit are steered to subprime loans which have interest rates that often spike after several years.

Another example comes from credit card policies, which jack up interest rates to 28 or 29 percent following a missed payment. And a missed payment on one card results in increased APR's on all that person's credit cards, even the ones with good credit history.

My question: If people are having financial woes, having trouble making payments, why would it be in anyone's interest to make it even harder for them to make their payments? Defaulted mortgages and defaulted credit card balances redound to no one's benefit. The borrower loses (punished, I guess, for being in financial straits, proof that he's a bad person) and the lender loses (loan default means no income).

Those of you who have more financial savvy than I, please 'splain it to me.