If sears sends me a refrigerator that I didn't buy, I get to keep it. I can treat it as an unconditional gift. I have no obligation to either return, relinquish, or pay for it. I did not enter a business relationship with sears. I signed no contract, and the object was delivered to me. The law says that it is unconditionally mine. This is a fairly important consumer protection. I agree with this law and think that it should extend to falsified loans for essentially the same reason. In the absence of such a law, the lender has placed upon me an enormous amount of liability.

Consider the case where I have a small checking account in which I deposit my child's allowance, the child discovers that this account has $10,000 in it for some reason, and, like a child, goes on a spending spree. Is my child responsible for exercising some measure of restraint with this money? They are, in the eyes of the bank, authorized to access this money for their own use, but suddenly you think that I am obligated to return thousands of dollars that my child spent on minecraft skins or something because the lender wants to lower the friction for loan applications?

The lender should be generally SOL.

Knowledge of the transaction is an essential element of a valid loan application.