Lawsuit accuses Arbor Realty of hiding $1.25 billion in bad loans
The story the company allegedly told
According to the filing, the trouble traces back to the company’s fourth quarter and full year 2025 earnings release on February 27, 2026 – the first day of what the lawsuit defines as the “Class Period.” The company’s CEO reportedly told investors on the related earnings call that the company was “pushing our timetable out a little bit” on resolving nonperforming and subperforming loans. The CFO, the suit says, reassured investors the company maintained its “expectation that we will resolve the bulk of our delinquent loans by the end of the year.”
The lawsuit alleges that across multiple earnings calls, SEC filings, and investor presentations over the following months, the company repeatedly told the market it had “ring-fenced” its problem loans – meaning they were confined to an identified pool – and had “clear visibility to resolution on non-performing assets.”
A March 11, 2026 investor presentation, according to the filing, claimed the company was “projected to take back between $50M – $125M of non-performing loans” as REO assets from the second through fourth quarters of 2026, and that it “expect[s] to resolve between $350M – $400M of these assets during the year, which will bring the REO balance down to ~$300M by the end of 2026.”
By August 3, 2026, the filing alleges, the company’s second quarter investor presentation was still touting that Arbor “is Singularly Focused on Accelerating the Resolution of Non-Performing Assets” and “[c]ontinue[s] to make progress by resolving more non-interest earning assets versus new defaults.” The presentation further claimed Arbor “Has a Defined Path to Resolve Nearly All Existing Delinquencies and Reduce REO Substantially by Year-End,” the suit says.
Where it started to crack
The first signs of trouble allegedly surfaced on May 8, 2026, when the company released its first quarter 2026 results. The filing says the company reported net income of just $0.6 million for the quarter, compared to $30.4 million in the same period the prior year. The company had 19 nonperforming loans with an unpaid principal balance of $481.5 million, the suit says, alongside loan loss reserves of $16.1 million – compared to 26 nonperforming loans with a balance of $569.1 million and reserves of $10.2 million as of December 31, 2025.
