To buy good loan you have to check whole supply chain. To issue a good loan you need to check only the borrower and you have every incentive to do so if you can't offload the loan to someone else after it's created.

Uh, no, lol, unless there is fraud expected ... it's not quite simple to "check the borrower" and it takes a decent amount of legwork.

Exactly. And it's a work that bank has to put in if it can't sell the loan. But if the bank can sell the loan it becomes "check the borrower or bullshit the buyer" and the banks decided latter is less work. And that's why 2008 happened.