Normally, you get clear title to a property. This means no unpaid liens except those listed in the title commitment remain when you close. If the title company is telling you they will issue title insurance, then all the liens must have been addressed, not just the 1st lien. This would include any 2nd lien, any HOA liens, any mechanics liens, any personal liens on the seller that might cloud the property, etc.
If the escrow officer is telling you that they cannot issue a title policy or that exceptions are out of the ordinary, you need outside counsel as to what to do, but at least ask the escrow officer what the title commitment says.
The title insurer will want to see an agreement from the bank(s) that all liens will be satisfied. Normally, the 1st mortgage gets the bulk of their lien paid off and the 2nd may get a nominal several thousand dollar payoff. In a non-short sale situation the payoff letter from the banks would dictate the amounts to be sent to each bank. In a short sale the banks agree to a lesser amount than the full payoff, but it is in writing.
Does the buyer have a "right" to see it? Good question. The escrow officer must see it in order to get the title insurance. As long as buyer gets a general warranty deed plus clear and insured title, I don't see why anybody else needs to see the letter.
The escrow officer has a fiduciary duty to buyer on the issue of title insurance. So, regardless of whose name is on the door of the title company, they can't deceive you into buying a property with liens in place. That would set them up for a major lawsuit and Texas DTPA would punish them and they'd probably lose their TDI license.