Arbor Realty Trust Faces DOJ/FBI Probe, Stock Plummets

Arbor Realty Trust (ABR) faces a DOJ/FBI investigation for its lending practices and loan book performance, as reported by Bloomberg on July 12, 2024. This follows 22 critical reports by Viceroy Research, which has raised concerns since November 16, 2023. These issues have led to a 20% drop in ABR's stock price.

Arbor Realty Trust (ABR), a leading real estate investment trust (REIT) based in New York, is currently under investigation by the U.S. Department of Justice (DOJ) and the Federal Bureau of Investigation (FBI) regarding its lending practices and loan book performance [1]. This development follows a series of critical reports from short seller firms, including Viceroy Research and NINGI Research, which began raising concerns in late 2023 [2].

The investigation comes at a time when Arbor Realty Trust's stock price has dropped by approximately 20% as a result of the short sellers' allegations [1][2]. The crux of these concerns lies in Arbor's lending practices and the reported overvaluation of its loan portfolio.

According to sources familiar with the matter, investigators are delving into the specifics of Arbor Realty Trust's lending practices, as well as its claims regarding the performance of its loan book [1]. The DOJ and FBI are reportedly inquiring about whether the lender's practices adhere to applicable regulations and whether any misrepresentations have been made to investors [1].

Short seller firms, such as Viceroy Research and NINGI Research, have claimed that a significant portion of Arbor Realty Trust's loans are distressed, with underlying collateral that is vastly overstated [2]. These firms assert that the loans do not qualify for refinancing anywhere and are nearing maturity [2]. In addition, NINGI Research has accused Arbor of concealing a 'toxic' real estate portfolio of mobile homes with 'a complex web' of real and fake holding companies for over a decade [2].

Arbor Realty Trust has countered these allegations, maintaining that it conducts itself properly and looks forward to its second-quarter earnings call [2]. The company has not yet responded to requests for comment regarding the ongoing investigation by the DOJ and FBI [1].

In summary, Arbor Realty Trust is currently under investigation by the U.S. Department of Justice and the Federal Bureau of Investigation for its lending practices and loan book performance. These concerns stem from a series of critical reports from short seller firms, which have led to a significant drop in the company's stock price. The outcome of this investigation could have significant implications for Arbor Realty Trust and the broader real estate investment trust market.

[1] "Arbor Realty Trust Probed by US DOJ Over Lending Practices, Loan Book." Bloomberg, 12 July 2024, https://www.bloomberg.com/news/articles/2024-07-12/arbor-realty-probed-by-us-doj-over-lending-practices-loan-book.
[2] "Arbor Realty Trust Being Probed by US DOJ Over Loan Practices: Bloomberg." Reuters, 12 July 2024, https://www.reuters.com/markets/us/arbor-realty-being-probed-by-us-doj-over-loan-practices-bloomberg-reports-2024-07-12/.