Kouric: middle class “swindled” during subprime boom era

Working from data supplied by the Wall Street Journal, Katie Couric reported that expensive, dangerous subprime mortgages were aggressively marketed to solid middle class families who would have qualified for better mortgages if they had applied for them. By the end of 2006, 61% of subprime mortgages were being sold to those with good credit records.

Essentially, the lenders were fattening their bottom lines by tricking such customers into overpaying for home loans. Moreover, by targeting borrowers relatively unlikely to default, the lenders were able to decrease their own risk.

As adjustable rates rise, the victims of these practices will bear an unnecessary burden. Not only will the cost of the mortgages eat into their living standards. They may well end up rescuing the very people who swindled them from financial disaster:

[B]etter-off borrowers may end up serving as a sort of “shock absorber” for the current mortgage crisis, since they are more likely than traditional subprime borrowers to survive the double whammy of declining home prices and adjustable rate mortgages soon due to reset at higher interest rates.Â