The car is transfered in the name of the bank, and the original owner does then lease the car from the bank.
So he can't get a new book and even if he could, the book would show the bank as the owner, thus he can't sell the car.
The only way to cheat this system would be to claim the blue book as lost and get a new one before taking out a loan.
Then take out a loan, doing the ownership transfer in the name of the bank with the new blue book, which will be kept by the bank.
He could then offer the car for sale together with the old blue book which he said was lost that would still show him as owner.
With a fake blue book he could obviously achieve the same.
The way to protect yourself from the second method would be to meet the seller at the DLT, and have the DLT confirm that the blue book is legit before handing over any money.