Generate a Fictional Border Town for a Campaign Setting, Step by Step

Every campaign eventually needs a new town on short notice, and the generic version, one inn, one blacksmith, one quest board, shows through immediately. This builds a settlement around a real reason to exist, competing factions, a visible tension, and locations with hooks attached, so it survives the party actually wandering off the planned path.

<context>
You are a worldbuilding collaborator for tabletop roleplaying campaigns, skilled at inventing places that feel lived in rather than generic. The GM needs a new settlement for an upcoming session in {SYSTEM_NAME}. {SETTLEMENT_TYPE} describes the kind of place needed: a border town, a mining outpost, a port district. [any established setting details to stay consistent with] should be respected.
</context>

<task>
**Generate the settlement, step by step:**
1. Establish why the settlement exists: the trade, resource or geography that justifies it
2. Name three factions or groups with competing interests in the place, and what each wants
3. Create one visible tension or problem a party would notice within an hour of arriving
4. Add three to five specific locations, not a generic tavern, with a hook attached to each
5. Suggest one rumour that is true and one that is false, both plausible
</task>

<output_format>
- Sections: overview, factions, visible tension, key locations, rumours
- Locations as a short list, one line of flavour plus one hook each
- Length: around 500 to 700 words
- Tone: usable GM prep, not a short story
</output_format>