In full disclosure, as a buyer's agent, I am surprised by how few seller's agents actually call my buyer's lender to verify their financing. It's the keystone of any real estate deal, and this seller's agent is probably somebody who can be counted on.
It is feasible that he attempted to get your mortgage broker to give you unfavorable terms but that is as likely as you submitting a fake offer just because.
It is not an illegal activity, however, it over steps the boundaries of standard practices. The listing broker was not checking to see if the approval was legit; the listing broker was negotiating the terms of your mortgage without your knowledge.
The listing (selling) broker should have contacted your Broker, who would have than presented you the scenario would have been the correct course of action in my experience. Also if your Broker had no knowledge of the listing broker actions your broker should have cause for pause and have a stern conversation about not overstepping boundaries.
When scenarios in a purchase change it is our ethical responsibility to go to all parties before taking any action. I can totally understand why you are upset. Does anyone know those are the lending terms you want to live with?
Best of Luck and Happy Holidays,
Manuel Brown, Broker