An appraisal fraud scheme will send the perpetrator behind bars for decades, after his use of stolen credentials left lenders holding the bag for more than $65 million in defective loans, according to the U.S. Department of Justice.

Former appraiser Armando Martinez was sentenced in early July after previously pleading guilty to bank fraud. A former Florida resident who had his license revoked in the Sunshine State, Martinez was originally charged with illegally taking the identity and license number of a legitimate appraisal professional to commit numerous crimes, the DOJ said.

With stolen credentials, Martinez accepted inspection work on dozens of Florida residential properties for multiple mortgage lenders. Apart from impersonating a licensed appraiser, Martinez deceived lending partners by advising them he was conducting inspections on site in the state, but in reality, he had instructed others to take photos on his behalf after he fled to the Dominican Republic as federal officials began pursuing their investigation.

From his base in the Caribbean country, Martinez then sent appraisal reports from his own computer, taking credit for the inspection work.

"Based on the false and fraudulent appraisals, the financial institutions were fraudulently induced to approve and fund mortgage loans and pay Martinez appraisal fees," the U.S. Attorney's office for the Middle District of Florida said in a press release. Worth more than $65 million, the newly defective or impaired loans were backed by the Federal Housing Administration or government-sponsored enterprises Fannie Mae and Freddie Mac.

A judge in a federal district court in Texas, where Martinez had relocated, handed down a 20-year prison sentence for crimes committed. The case was investigated by attorneys from the Federal Housing Finance Agency, which oversees both GSEs. FHFA counsel was joined by lawyers representing the U.S. Department of Housing and Urban Development.

What happens to appraisal defects

A severe appraisal defect, such as criminal fraud, in mortgage originations requires the repurchase of the loan by the original lender.

Even when removing outright criminal intent, repurchases can cost lenders between $27.1 billion and $59.7 billion resulting from appraisal inconsistencies, according to 2025 research from Restb.ai. Similarly, Restb.ai found approximately one in three loans held some sort of appraisal error.

In a June analysis of a sample of late 2025 originations to identify defect risk, Fannie Mae found appraisal-related issues made up four out of the leading 10 factors signaling potential gaps in controls that could negatively affect loan quality.

The findings underscore the importance of strengthening appraisal review and feedback loops, according to the GSE.