Bib level holds should be allowed on bibs with non-viable items if there is an active order record attached. Currently, this is not possible, and there is no way to configure for this. There are a number of ways to configure the (many) places dictating holds and what can be held. But at the moment, none of them allow the hold (without a staff override) if the only remaining item is non-viable (missing, lost, etc.)

Idea Value
It doesn't make sense to me that holds are allowed on bib records with only an order record, but as soon as that same record has a non-viable item attached, it's stopped from accepting holds.

Half the reason we're placing orders on existing bibs is because our last copy is having to be withdrawn for one reason or another, but it's popular enough to want to replace. And so popular enough that patrons may want to place holds. I understand the design that, no matter how you're set up for holds, you generally wouldn't want holds on a record with no viable copies. But if there's an active order record on it, that should no longer matter.

Not all libraries use order records, of course, and so this probably isn't an issue for them, as they have items in an on order status instead. I don't know if those can take holds, but if they do, it's that much more reason to be consistent for those using order records.

FYI, evidently, there was a bug in the last few versions of Sierra that was allowing this to happen, so we we merrily went on our way, assuming this was expected behavior. Turns out, it was "corrected" in 5.3. On the bright side, how hard could it be to make it an option again!