Actually, both side have to approve of the loan before it is made. I get calls and letters all the time from companies telling me I've been approved for a loan, but if I don't approve those offers they don't become loans.
Incidentally, there were no mortgage loans made that anyone knew could not be paid. They just all knew (or should have known) that some loans couldn't be paid unless the home values continued to rise rapidly.
You can apply for a loan to purchase a 15 million dollar yacht while making 30k a year. Think you'll get the loan?
I almost certainly would if I had an underwriter nicknamed Fannie or Freddie (or if I put up sufficient collateral).
When you apply for a loan, the one wanting the money, has ZIP authority, or any say whatsoever as to whether their loan is approved. Zip, nada.
Despite what passes today for common sense, there is no such thing as a contract approved by only one party. Anyone who consciously signs a loan agreement is signifying their approval of the terms.
LOL!
OK, I give up. Anyone wanting a big fat loan are legally authorized to approved the loan themselves.
:o