The mortgage mess that has upended millions of homeowners’ finances is now taking a bigger bite out of the nation’s banking system.

And while depositors with insured accounts face little risk of losing their money, the insurance fund’s top regulator said it may have to borrow money from the Treasury to make good on that promise to consumers.

U.S. and European banks, already burdened by losses and concerns about their financial health, face a new challenge: paying off hundreds of billions of dollars of debt coming due.

At issue are so-called floating-rate notes -- securities used heavily by banks in 2006 to borrow money. A big chunk of those notes, which typically mature in two years, will come due over the next year or so, at a time when banks are struggling to raise fresh funds. That's forcing banks to sell assets, compete heavily for deposits and issue expensive new debt.

Today's guest post comes from Mark Thoma, who labors tirelessly in the pacific Northwest. Mark is a Professor of Economics at the University of Oregon, where he also pens the well regarded blog, Economist's View.

In today's guest commentary, Mark hits upon a subject near and dear to our hearts, the perennial Housing bottom callers.

Most media sources will report that mortgage applications posted their first increase in three weeks, according to data released by the Mortgage Bankers Association on Wednesday, as mortgage rates fell slightly. The group’s weekly application survey found that applications rose 0.5 percent from one week earlier, with a composite index rising to 421.6 for the week ended Aug. 22. Applications are off 31.2 percent from year-ago levels, however, the MBA said.

But — as has been the case throughout the current cycle — the MBA data may be overstating forward demand for mortgages, given that the index data doesn’t correct for multiple applications.