The lender wants it documented because they will have a recorded lien against the vessel through a federal agency. When I first documented my boat in 1992 or so, I called the CG (then in Boston, now in Falling Waters, VA) and for $90.00 it was as a done deal. No bank financing, and the coast guard gave me a "title" history and lien check on the boat. Then in 1996 I took out a loan with Key Marine (now boatloan or something like that). Never, ever again. I had to pay Hinckley Insurance $450.00 to do a the same title check AND pay the CG fee that I did myself in minutes a few years before. Royal scam. Thing is, it gives the lender the ability to lien the craft, again, with a specific recording location and the ability to foreclose with little effort if they so feel. There is a process for de-documenting a boat, but they probably won''t do it without clearing all liens and recorded interests first. Without CG documentation, similar to your auto registration with the Secretary of State or whomever, the lender would have no "official" recourse to retrieve the vessel. To my knowledge, the boat registration people in most states involve Fisheries and Wildlife and they don''t generally record liens.