U.S. Justice Department Investigating Arbor Realty Over Lending Practices, Bloomberg Reports

(Reuters) – Arbor Realty Trust is under investigation by federal prosecutors and the Federal Bureau of Investigation in New York, months after short sellers attacked the lender’s practices and disclosures, Bloomberg News reported on Friday.

Shares of the company fell more than 19% in afternoon trading.

In 2023, short sellers including Viceroy Research and NINGI Research published reports alleging that Arbor Realty Trust, which invests in a diversified portfolio of structured financial assets, had a distressed loan portfolio.

Viceroy Research said Arbor’s underlying collateral for the loans is grossly overstated, adding that the loans are not eligible for any refinancing and are close to maturity.

NINGI Research accused the company of concealing a “toxic” mobile home real estate portfolio with “a complex web” of real and fake holding companies for more than a decade.

“We regularly cooperate with regulators and are confident that we are conducting ourselves appropriately. We look forward to our second quarter earnings call,” Arbor responded in an email to Reuters.

Arbor countered the short reports, saying they contained “numerous inaccuracies” and “erroneous statements.”

Federal investigators are now looking into the New York-based company’s lending practices and its statements about the performance of its loan portfolio, Bloomberg reported, citing people familiar with the matter.

The Justice Department did not immediately respond to Reuters’ request for comment.

(Reporting by Ananta Agarwal in Bangalore; Editing by Tasim Zahid)