Buyer Beware: North Carolina Mortgage Scheme Uncovered

A Raleigh, N.C., business owner and a home builder have been sentenced for their roles in a North Carolina 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 mortgage fraud scam involving new homes in Raleigh, Garner and Wake Forest.

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 home builders who had new properties on the market and offer them more than the listing price.

As part of their illict arrangement, the home builders would agree to let Davis pocket the difference between the asking price and the inflated offer.

Davis would seek investors to act as borrowers on mortgage applications, which would falsely state that the investor planned to live in the home.

Davis would then recruit renters who didn’t have good enough credit to qualify for a mortgage themselves. They would live in the homes in a “rent-to-own” plan and pay Davis a large down payment and low rent.

The scammer used a pyramid-type scheme, seeking money from new renters and investors to cover the difference between the home mortgage loan payments and the monthly rents to keep the scheme going.

Ultimately, when all was said and done, the mortgage lenders foreclosed on the homes, the investors’ credit was ruined, and the renters lost the 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.

SOURCE: Raleigh News & Observer