Monday Morning Cup of Coffee takes a look at news crossing HousingWire's weekend desk, with more coverage to come on bigger issues.

BofA Merrill Lynch Global Research takes a look at what it calls the “persistent myth of loosening mortgage credit” and there are some troubling issues they raise in their note to clients.  

Their analysts start by establishing that the Federal Reserve Board's Quarterly Senior Loan Officer Survey of credit conditions indicated that mortgage credit loosened in Q2 2014.

“When we examine the FICO score trends of actual purchase mortgages closed on a monthly basis, we find the opposite is true: aggregate FICO scores for purchase mortgages continue to move higher. We think the explanation of the difference is that while FICO trends are lower in all financing channels (such as conventional or government), the highest quality channels are increasing share of mortgages closed, hence the aggregate score is rising,” they write. 

Analysts note that a significant driver of the loss of share by lower FICO government financing appears to be the rise in Federal Housing Administration’s mortgage insurance premiums that started in 2010.

“We estimate that the 12-month rolling FHA purchase mortgage production is down by roughly 50% from its peak rate in 2010. While FHA no longer needs to provide countercyclical support to housing, its market retreat brings ‘underserved’ mortgage financing conditions back to low income, often first time homebuyers, with significant implications for economic recovery measures such as housing starts and new home sales,” the note states.  

BAML says that from their perspective, the loss of FHA share due to MIP increases is indicative of how little capacity there is in housing to absorb higher mortgage rates, a factor that analysts believe will continue to bias long term interest rates lower. It also is a factor in the supportive technical environment we see in residential MBS production.

“In our view, all of this continues to bias spreads and yields in securitized products lower. We continue to recommend moving down in credit in CMBS, non-agency MBS and CLOs, and down in coupon and up in duration in agency MBS and CMOs,” they state. 

Speaking of a natural segue, we’ve all seen the news that former Fed Chair Bernanke was turned down for a refinancing.

It was just amusing to see this report start the way it does, with the appropriate and ironic use of quotation marks in the first sentence.

You know it’s a weird situation when the person responsible for “saving” the US financial industry can’t refinance his own house!

From Bloomberg:

Ben S. Bernanke said the mortgage market is so tight that even he is having a hard time refinancing his own home loan.

The former Federal Reserve chairman, speaking at a conference in Chicago yesterday, told moderator Mark Zandi of Moody’s Analytics Inc. — “just between the two of us” — that “I recently tried to refinance my mortgage and I was unsuccessful in doing so.”

When the audience laughed, Bernanke said, “I’m not making that up.”

If you haven’t read about how student debt is dragging on the housing and mortgage finance industries, welcome to HousingWire, you must be new here. HousingWire has for more than a year been reporting on the link between high levels of student loan debt and the struggling housing recovery.

Via our friends at Motley Fool, we now have a solid metric on exactly how strong that drag is.

John Burns Real Estate Consulting has alerted its clientele to a dismal reality: Student debt will cost the housing industry approximately $83 billion in sales in 2014. With college debt increasing by about 6% every year, there is every reason to believe this trend will continue, and probably worsen. 

Mortgages: Debt matters more than ever
The number-crunching involved in the analysis puts some real heft behind the argument that student debt is holding housing back. The report estimates that heavy college debt will reduce real estate sales by 8% for this year, and that households that pay $750 or more for college loan debt each month are priced out of the housing market entirely.

This makes sense, particularly with the new emphasis on debt-to-income ratios baked into the new qualified mortgage rules. A recent analysis from The Wall Street Journal, using information provided by mortgage lender, highlighted this issue. When parsing mortgage applications of those with student loan debt, approved borrowers had monthly college loan payments of about $300. Mortgage applicants paying nearly $500 per month, however, were usually denied.

One month to mid-term elections, and you know what that means. The signal-to-noise ratio in economic reporting is about to spike to somewhere around, oh, 100:1. But one of this writer’s favorite go-to blogs breaks down a serious, sober look at where we are in the economic “recovery” and why, despite all the cheerleading and the pointing to numbers on the stock market, that recovery means jack and squat to most Americans. The bottom line, whether we’re looking at income, household wealth, investments, or any other sane metric? For 90% of Americans, there has been no recovery.

The FDIC reported no failed banks for the week ending Oct. 3.