David has a credit card - but with a limit of just £200. It's no surprise the limit is so low; David has a long history of county court judgments and is repeatedly late with the monthly payments on a personal loan. Often he uses the credit card to withdraw cash, very expensively, just to tide him through to pay day.
With that sort of record, you wouldn't think David was a suitable person to take on a large mortgage. But all he had to do was approach a mortgage adviser who specialised in "self certification" loans, designed primarily for self-employed people who don't have a salary record. David applied for a self-cert loan, and put his annual net profit down as £100,000.
Self-cert is known in the trade as "liar loans" - and the profit figure was entirely fanciful. Everybody knew David was lying. He did. The mortgage broker did. The lender did - after all, it saw his credit card limit and his arrears situation.
But David was awarded the mortgage which, based on an income of £100,000, meant he could borrow £300,000 or more. The lender made an offer without questioning him.
It was the same for Michael, who runs a picture framing business. He put his income down as £170,000 a year so he could obtain a huge self-cert loan. Again, the lender arranged a mortgage - not bothering to question why, with such a giant income, he was recently forced into a debt repayment plan and received working tax credit, which is only paid to low earners.
You might say, well, the lenders and brokers are plain stupid, they'll lose the money and it serves them right. But it doesn't work that way. The broker picks up a "procuration fee" usually £1,000 or more for this "advice". The guy in the lending department hits his target and earns his commission. Meanwhile, the lender parcels up the loan as quick as it can and sells it along with a whole load of others for a nice profit as a top-rated bond on the securitisation market.
I've made up the names David and Michael, but their cases are real. The Financial Services Authority found them after reviewing the files of specialist lenders in recent months.
What's evident from the FSA's research is that the worst mortgage horrors come from these specialists, not the mainstream banks such as Halifax or Abbey, whose record is, by comparison, impressively clean.
It is the specialist lenders - with their self-cert, buy-to-let and "impaired credit" - who through securitisation have done the most to wreck the market.
It would be easy to blame the FSA and say they should have done more to spot the dodgy outfits. But these weren't little back street operations. Many were run by big investment banks, for whom the residential mortgage-backed securities market offered juicy profits.
Investment banks are those delightful organisations that, apart from pumping and dumping the property market, have created such monstrosities as PFI and train leasing - usually the reason why just four carriages turn up in the rush hour, crammed with commuters, instead of a proper train. Yet our government remains in thrall to investment bankers, whose reputation (except for greed) is now in tatters.
Instead it's almost inevitable that investment bankers will be paid bumper fees by the government for advice on sorting out the credit crunch. Advice like returning Northern Rock to the private sector, when it should be returned to the mutual sector. It's like asking arsonists for advice on putting out the flames.