I understand this and as a current grad student can respect it to an extent, but at the same time the dichotomy that exists between Michigan and other peer schools is puzzling.
Without looking it up, I can't imagine that Michigan has a problem of mass exodus with their freshman class before their sophomore year that needs to be remedied by harsh standards in the transfer class. It seems that other schools fill this gap with the best their admissions department can find, and the registrar trusts that those identified have taken quality coursework to "cut it", while M has two lines of review, with Admissions potentially saying "we want this person" and the registrar occasionally saying "that's nice, but we don't want the courses they come with"
I also think there is a difference between a transfer student (who takes courses precedent to enrollment usually for an ulterior purpose than graduating from M) versus an enrolled student at M taking coursework elsewhere (whose purpose is solely to graduate from M without spending 100% M prices). I think it's okay to evaluate those two students differently.