The FSA is advising banks to take more care when issuing mortgages. It is also advising chickens to look both ways before crossing the road, small children to brush their teeth twice daily, and women to put their knickers on before their tights. Well, perhaps not all those things, but the latest “common sense proposals” for home loans from the regulator are scary for what they reveal about the way bankers behaved during the boom.

We suspected that few lenders had bothered to check the key details in the mortgage application, but now we know they didn’t. You say you’re earning 60k? Fine, here’s £380,000 towards that £400,000 house you want to buy. It will fit fine into that package of collateralised debt obligations we’ve been asked to put together to sell on to that German bank that’s gagging for more of them. After all, the bigger the mortgage, the fewer of them we need to fill the package, right?

Co-incidentally, the FSA’s invitation for bankers to place common sense above greed came out on the day the FT revealed that the least creditworthy home-owners had geared up the most. “Equity withdrawal” is the name of that clever mechanism which allowed you to use your home as a piggy-bank because, in the argot of the period, “it’s earning more than I am”. It’s understandable, in a way, if the borrowers believed this, since an offer of money is always tempting, but it’s shocking to see the bankers believing it too.

Small wonder that they are so reluctant to foreclose on those in arrears today. Not only do they not want to repossess, but they must be vulnerable to the charge of mis-selling the top-up loan, if not the whole mortgage, to borrowers who never had a hope of servicing, let alone repaying, the debt.

Today the position is reversed. Only the very best borrowers are offered money at close to base rates; the terms for the majority, if they can get an offer at all, are close to usurious in an age of shrinking pay packets. The bankers are as risk-averse now as they were risk-addicted in the boom. No wonder they are despised by so many who cannot do without them.

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