Ethan Purchases a House for $250,000

Multiple Choice

Ethan purchases a house for $250,000. He borrows $200,000 from StarCross Bank and gives the bank a mortgage on the house for this amount. StarCross Bank fails to record the mortgage. Ethan then applies to borrow $200,000 from Pentalon Bank. Pentalon Bank reviews the real estate recordings and finds no mortgage recorded against the property, so it lends Ethan $200,000. Pentalon Bank records its mortgage. Later, Ethan defaults on both loans. In this case, which of the following would be true in case of the possible foreclosure on the collateral?

A) StarCross Bank can foreclose because they made the first loan.
B) Pentalon Bank can foreclose because they recorded the mortgage.
C) The collateral has to be returned to Ethan since there is a violation of the recording statute.
D) None of the parties involved can claim ownership of the collateral as it passes into the public domain.