Mortgage fraud sends 2 to prison

Scheme preyed on renters, investors

RALEIGH -- A Raleigh business owner and a Raleigh home builder have been sentenced for their roles in a mortgage fraud scheme, the U.S. Attorney's Office said Wednesday.

U.S. District Judge Malcolm Howard on Tuesday sentenced James Thomas Davis, 56, of Raleigh, to 16 years and 8 months in prison. Davis called himself a real estate consultant and was involved in a fraudulent scheme involving new homes in Raleigh, Garner and Wake Forest, according to federal prosecutors. Davis owned Easy Financial Services and Eagle Investments Club.

Howard also sentenced David Layton, 55, a Raleigh-based residential home builder, to four months in prison, said Layton's attorney, Jack O'Hale of Smithfield.

Federal investigators have said Davis would approach builders who had new homes on the market and offer them more than the asking price. The builders would agree to let Davis pocket the difference between the asking price and the inflated offer, investigators said.

Davis would seek out investors to act as borrowers on mortgage applications, which would falsely state that the investor planned to live in the home, investigators said. Davis would then recruit renters who didn't have good enough credit to qualify for a mortgage themselves. They would live in the homes under a "rent-to-own" plan and pay Davis large down payments and low monthly rents. Davis used a pyramid-type scheme, seeking money from new renters and investors to cover the difference between the mortgage payments and the monthly rents to keep the scheme going.

Ultimately, the lenders foreclosed on the homes, the investors' credit was ruined, and the renters lost their down payments and place to live, according to investigators.

Layton admitted conspiring with Davis to make and use false documents at real estate closings. Last year, a jury convicted Davis of conspiracy and fraud charges.