The Community Home Lenders Association, a nonprofit national association of lenders, responded to the Federal Housing Administration’s latest financial report by reminding Congress that the FHA needs to remain a crucial source of mortgage loans during the shaky housing recovery.

In anticipation of the Senate Banking Committee proceedings Thursday, CHLA voiced its opinion on FHA and its projected $16 billion shortfall recently reported.

“We commend HUD Secretary Donovan for the additional steps he recently announced to protect FHA and we applaud Congress for moving quickly to hold hearings on FHA,” the CHLA said. “It is appropriate that Congress exercises vigilance in evaluating the financial health of FHA. But we urge Congress not to take any precipitous actions that could impede the critical role FHA plays in financing home purchases, at a time when we are starting to see a rebound in home purchases and housing prices.”

CHLA applauded the U.S. Department of Housing and Urban Development for taking significant steps toward strengthening FHA by raising premiums and ending the costly seller funded nonprofit down payment program.

Shaun Donovan, secretary of HUD, recently announced additional steps to clean up the financial performance of FHA loans in the future and to minimize losses on existing FHA distressed loans.

“FHA played an essential role in stepping in to provide mortgage credit in the wake of the financial crisis of 2008,” CHLA said. “As a consequence, FHA is experiencing stress from providing mortgage loans during a period in which many other lenders and institutions suffered much more serious losses. Congress should not adopt measures which harm FHA’s ability to perform its vital function, simply based on projections for prior loans made before important FHA reforms were put in place.”

CHLA noted that the MMIF Report is simply a prediction, projecting that the FHA will be fully capitalized by fiscal year 2014. Also, the Congressional Budget Act includes budgetary controls intended to endure future loans will be profitable.