Was it a 767 and were they high on the profile?
If it was a 767 it may have been that they were looking at the Map, and if it was not a GPS jet, that would explain why the Map was not accurate (although 2 nm seems like a lot). Regardless, if APP was armed the jet would have intercepted the LOC.
Many prefer to stay in HDG SEL (or LNAV) until late in the intercept to ensure that the glideslope is not captured first. If they thought they had blown through the Localizer, raw data would have answered that question.