Nonperforming assets hit $1.25 billion. The stock lost 29% in a day
A class action filed November 9, 2026 alleges Arbor Realty Trust spent months reassuring investors it had its problem loans under control - while the pile was actually growing.
The suit, filed in the US District Court for the Eastern District of New York, claims the NYSE-listed mortgage REIT made "materially false and/or misleading" statements about its ability to work through a portfolio of nonperforming loans and real estate owned assets that had ballooned to roughly $1.25 billion.
Arbor Realty is a nationwide real estate investment trust and direct lender that provides bridge, construction, mezzanine, and preferred equity financing for multifamily, single-family rental, and commercial real estate properties. It trades on the New York Stock Exchange under the ticker ABR.
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.
According to the filing, the stock fell $0.96, or 11.75%, to close at $7.21 on that news, on unusually heavy trading volume.
Then came October 30, 2026. The lawsuit alleges the company reported a GAAP net loss of $85.4 million for the third quarter - or $0.51 per diluted common share - and announced it was suspending its quarterly cash dividend "during this challenging environment to preserve capital and maintain financial flexibility."
The numbers, the suit says, had gotten worse. The company disclosed it now had "thirty-two non-performing loans with a UPB of $647.6 million, before related loan loss reserves of $41.9 million, compared to nineteen non-performing loans with a UPB of $428.8 million, before loan loss reserves of $31.1 million at June 30, 2026." On the earnings call, the CEO reportedly stated the company "ended the third quarter with approximately $750 million of delinquencies and around $500 million of REO assets for total nonperforming assets of roughly $1.25 billion, which is up around $200 million from last quarter's numbers."
On that news, according to the suit, the stock fell $0.88, or 29.14%, to close at $2.14 on October 30, 2026, again on unusually heavy volume.
What the lawsuit says was hidden
At its core, the filing alleges the company kept five things from investors: that the "ring-fenced" loans were not actually contained and new delinquencies kept forming faster than the company could resolve them; that the company had no reasonable basis for claiming it would clear nearly all delinquencies by year-end; that it could not realistically shrink its REO balance at the pace it had projected; that the mounting losses, reserves, and impairments were threatening the company's earnings and its ability to keep paying its dividend; and that its upbeat statements about the business were, as a result, "materially misleading and/or lacked a reasonable basis."
The lawsuit brings two federal securities fraud claims - one against all defendants, and a second against the company's top executives for their alleged role in controlling what the company told the market.
For mortgage lenders and REIT investors watching their own nonperforming loan pipelines, the case puts a sharp point on the gap between what a resolution timeline looks like in a presentation deck and what it looks like when new defaults keep arriving.
The claims in this lawsuit are allegations only, and no court has made any findings on the merits of the case.
