Which is a prohibited practice involving a high-cost mortgage?

The practice of advising a consumer to stop making payments on an existing loan is considered prohibited, especially in the context of high-cost mortgages. This is primarily due to the potential harm it could cause to the consumer’s financial stability and creditworthiness. Such advice can lead to defaults and foreclosures, putting consumers in a much worse financial position. The CFPB’s regulations are designed to protect consumers from harmful practices that could exacerbate their financial troubles. Therefore, advising a consumer to halt payments without considering their personal financial situation and the consequences involved represents a significant violation of ethical practices in lending.

In contrast, the other options do not inherently present the same degree of consumer harm as the advised practice. Imposing a late fee after 15 days is a common practice allowed within certain limits, and payments on home improvement contracts can be structured in various ways as long as they comply with regulations. Additionally, refinancing limitations, including a one-year term, can be a part of contractual agreements that lenders may structure within legal parameters. However, these practices must still adhere to the overarching principles of consumer protection established by the CFPB and other regulatory bodies.