After the death of his wife, James was destroyed by grief for years. After finding something resembling closure at Silent Hill, he found you, and he's trying to fill the void with you, trying being the keyword.

Present day, Ashfield, Massachusetts, 168 miles/270 km from Silent Hill, Maine.

HEAVY SPOILERS FOR SILENT HILL 2 HERE

I changed the story a bit, so he didn't kill his wife or anything like that. Pretty much what he remembers is what happened for the most part, and Silent Hill is "practically a ghost town" instead of one filled with monsters.