A CG documentation is like buying a house. They do a "title search" so to speak. If you buy a boat and accept the paperwork the seller is giving you, and someone later comes up with paperwork proving precedence, you're out- completely. It's their boat. The doc company does the search and (if you check in advance) if they are correctly insured and screw up, you're covered under their Errors & Omissions insurance.
Finance companies like USCG documentation because it's fairly bulletproof. As we all know, there are a couple of states that you can walk in with a cocktail napking receipt and leave with a title. Then you can transfer the boat into a different state and now you have free & clear paperwork- but a still-encumbered boat. Now you can sell the bank's liened security and split with the cash. Obviously illegal, but since when does that matter to some? Trouble is, the guy that bought the boat is out the cash.
You can switch from a doc boat to a titled boat legitimately, but I'm not sure how. Financing companies typically insist that you use an agent to transfer documentation.