Walter R. Davis

Causal Indicator Models: Identification, Estimation, and Testing

In 1993 we presented “Causal Indicator Models: Identification, Estimation, and Testing” in a methodology session at the American Sociological Association Convention in Miami. Less than 2 years earlier, Bollen and Lennox (1991) was published in Psychological Bulletin and the interest in indicators that determined latent variables seemed to intensify in response. The Bollen and Lennox article was directed toward calling attention to causal indicators and their implications for psychological and other social science research. However, this article provided little guidance on how to analyze causal indicators. The aforementioned conference paper was an attempt to provide such guidance. As its title suggests, we had separate sections on issues of identification, methods of estimation, and ways to assess model fit in causal indicator models. We created two rules of identification that were particularly helpful in models with causal indicators and drafted a separate paper to prove these rules. For a variety of reasons, we never published these works. Yet somehow word got out and we have had numerous requests for copies of the conference paper throughout the years, but particularly over the last few years. Part of the reason for the interest in this conference paper is that awareness of causal (or formative) indicators continues to grow. The recent debate in Psychological Methods is just the latest evidence of this interest and uncertainty about how to handle such indicators (see Bagozzi, 2007; Bollen, 2007; Howell, Breivik, & Wilcox, 2007). Another part of the reason is that researchers have sparse practical advice on methods to incorporate causal indicators into models. Our paper attempted to provide such advice where we systematically laid out the

The impact of predatory loan terms on subprime foreclosures: The special case of prepayment penalties and balloon payments

Abstract There are growing concerns about the way predatory mortgages erode housing equity. We examine another potential impact: the relationship between abusive loan terms and foreclosure. Do predatory characteristics increase the likelihood of foreclosure once other risk factors are taken into account? We use a national database of subprime refinance first‐lien loans originated in 1999 to analyze this question. Even after we control for other factors, refinance loans with prepayment penalties are 20 percent more likely and those with balloon payments are 50 percent more likely to experience a foreclosure than other loans. These findings suggest that predatory loans have the potential not only to erode household wealth, but also to heighten negative effects on individuals, households, and communities. Excluding losses to borrowers, we estimate that prepayment penalties and balloon payment requirements in 1999 refinance originations increased national foreclosure‐related losses to lenders and investors by about

Assessing the Impact of North Carolina's Predatory Lending Law

465 and

Two rules of identification for structural equation models

127 million, respectively.

Preventive servicing is good for business and affordable homeownership policy

Abstract This article examines changes in subprime mortgage originations before and after the implementation of North Carolinas Predatory Lending Law. Previous studies have noted a decline in overall subprime lending. This was to be expected, since the law was intended to reduce the number of predatory or abusive subprime loans. But which components of subprime lending declined, which remained stable or increased, and what happened to those loans that the law defines as predatory? Using a database of 3.3 million loans from 1998 to 2002, we find that the reduction that occurred after the law took effect was entirely due to a decline in refinancing loans and that almost 90 percent of this decline can be traced to a reduction in predatory loans. The law is doing what it was intended to do: eliminate abusive loans without restricting the supply of subprime mortgage capital for borrowers with blemished credit records.

The SF-36v2 and SF-12v2 health surveys in New Zealand: norms, scoring coefficients and cross-country comparisons

Identification of structural equation models remains a challenge to many researchers. Although empirical tests of identification are readily available in structural equation modeling software, these examine local identification and rely on sample estimates of parameters. Rules of identification are available, but do not include all models encountered in practice. In this article we provide 2 rules of identification: the 2+ emitted paths rule and the exogenous X rule. The former is a necessary condition of identification and the latter is a sufficient condition. We explain and prove each of these rules and provide illustrations of their application. These rules extend the coverage of structural equation models that we can check for identification. We also explain how they can be part of a piecewise identification strategy that extends their use even further.

The earned income tax credit as an instrument of housing policy

Abstract This article documents the growing importance of preventive servicing—business practices that emphasize early intervention in delinquency and default management practices that also help financially troubled borrowers avoid foreclosure. We suggest that the loan servicing side of the affordable housing delivery system may be underappreciated and undercapitalized. We use a database of more than 28,000 affordable housing loans to test several preventive servicing‐related propositions and find that after we control for loan and borrower characteristics, the likelihood that a delinquent mortgagor within this universe will ultimately default varies significantly across servicers. This suggests that loan servicing is an important factor in determining whether low‐ and moderate‐income borrowers who fall behind in their mortgage payments will end up losing their homes through foreclosure. It also suggests a need for policy makers to incorporate preventive servicing into affordable homeownership programs.

The Determinants of Home Price Appreciation Among Community Reinvestment Homeowners

Objective : To provide New Zealand population norms for version 2 of the SF‐36 and SF‐12 health surveys and report scoring coefficients that enable the construction of Physical and Mental Component Summary scores from New Zealand SF‐36v2 and SF‐12v2 data.

Does a high-tech boom worsen housing problems for working families?

Abstract The federal Earned Income Tax Credit (EITC), which was designed to aid low‐income working families and individuals, plays a role beyond that of income support. At a time when the availability of affordable housing is declining, the EITC also provides significant relief to households burdened by severe housing costs. This article examines the EITCs effect on housing cost burdens and analyzes and contrasts three proposals to increase its effectiveness as a housing tool. Because housing policy calculates affordability on a before‐tax basis, the positive effects of the EITC are often overlooked. If included in income, the current EITC, assuming full participation, reduces critical housing needs for working households by 18 percent. All three proposals analyzed would reduce the number of households with severe housing costs by considerably more, with our measure relieving these cost burdens the most. Finally, using the EITC as a housing tool specifically incorporates a work incentive into the assistance.

SPATIAL PROCESSES AND THE DUALITY OF CHURCH AND FAITH: A SIMMELIAN PERSPECTIVE ON U.S. DENOMINATIONAL GROWTH, 1900-1930

Homeownership is considered an effective wealth creation mechanism for low-income households. This study examines the appreciation of homes purchased with community reinvestment loans in a national pilot in the USA called the Community Advantage Program (CAP). Homes purchased between 1998 and 2002 are found to have appreciated at a median annual rate of 5.4% between the time of purchase and spring 2003. This is less than the national house price appreciation index of 7.0% (covering 1998–2003) but higher than other types of investments such as the Dow Jones Index (2.78% annual growth rate) and the average rate on a 6-month CD (4.34%) over the same time period. The median increase in net housing wealth of the Community Advantage homeowners is