New York Penal Law 185.10: Fraudulent disposition of mortgaged property

Real estate markets across the country are very sensitive markets, which rely heavily on the continued trust of banks and mortgage lenders. Because of this, there are laws in almost all areas of the country that protect lenders against fraudulent mortgage-related activities. In New York, one law that is designed to protect lenders is fraudulent disposition of mortgaged property.

What is Fraudulent Disposition of Mortgaged Property?

The crime of fraudulent disposition of mortgaged property makes it illegal for a person to sell or transfer an interest in a property that is currently encumbered by a mortgage. In order for any sale or transfer to be made valid, it will require approval of the mortgage lender and all other interested parties.

Examples of the Crime

Due to the complexity of real estate ownership, fraudulent disposition of mortgaged property is an important law that protects banks. An example of this crime would be if a person purchases a home and takes out a mortgage on the home. If the person then attempts to sell the property to another person and the mortgage lender is not made aware, or paid off, the process of transferring ownership would be considered fraudulent disposition of mortgaged property.

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Legal Scenario: What Would You Do?

Scenario

You recently sold a piece of heavy equipment that was stored in your garage, not realizing it was listed as collateral on your home mortgage agreement. Now your mortgage lender is threatening criminal charges, claiming you deliberately disposed of mortgaged property to defraud them.

Can I really face criminal charges for selling something I thought was mine, just because it was covered under my mortgage agreement?

Attorney's Answer

Under New York Penal Law § 185.10, fraudulent disposition of mortgaged property occurs when a person who has executed a mortgage on personal property sells, assigns, or otherwise disposes of that property with the intent to defraud the mortgagee. This is classified as a Class A misdemeanor, which carries penalties of up to one year in jail and a fine. However, the prosecution must prove that you acted with specific intent to defraud the lender — if you genuinely did not know the item was encumbered by the mortgage, that lack of intent could be a strong defense. An experienced attorney can challenge the intent element and potentially negotiate with the lender to resolve the matter civilly rather than through criminal prosecution.

This is general information only. Contact us for advice specific to your situation.

This law is the same for any real estate owner, including residential and commercial. It pertains to sale, assignment, or any form of transfer that was intended to defraud the mortgage lender.

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