MASON CITY — The current economic slump has a positive by-product: Lower interest rates on home mortgages.Local banks report increased customer interest in new home loans and the refinancing of existing mortgages as rates fluctuate just under 6 percent and, in some cases, under 5 percent."In an average month, I might have three refinances going," said Pat Thompson, mortgage banker at Farmers State Bank in Mason City. "This month I have 15. All of a sudden, things got a little wacky."He added that rates have fluctuated up and down as much as a half percent since January "when for so many months before that, they were at 6.25, with as little swing as an eighth."A 30-year fixed rate mortgage at local banks on Tuesday ranged somewhere between 5.75 percent and 5.85 percent while 15-year fixed rates came in just over 5 percent.Mortgage banker Diane Froning of Commercial National Bank agreed that inquiries about rates have increased.Froning said she has seen about a 50-50 split between patrons who want to simply drop their interest rate and those who want to consolidate debt into a new loan.She cautioned, however, that a new loan may not be justified, despite the low current rates."If it is the matter of one percent, it just may not be in your best interest to pay the costs associated with a refinance," she said, referring to legal and closing fees.

Agency helps avoid foreclosures

Patricia Montejano struggled to make ends meet before going through the beginning stages of foreclosure.

"I didn't realize it was so high," Montejano said of an almost $1,000 monthly mortgage payment. "I felt like I had to pay more (on daily expenses) ... like with having to pay for smaller things, like day care and groceries."

Montejano is a prime example of people the Texas Foreclosure Prevention Task Force -- an agency created by NeighborWorks America, Texas Department of Housing and Community Affairs and about 50 other organizations -- wants to target.

The agency, dedicated to reducing foreclosures, has launched commercials, education and outreach meetings, training and a bilingual Homeowner's HOPE Hotline, 888-995-HOPE.

"I think if you feel that you're having to struggle, definitely start asking for help," said Montejano, who is now a housing counselor.

(AFX UK Focus) 2008-03-27 12:49 GMT: Kroszner says Fed to 'consider' narrowing new mortgage lending rules UPDATE

(Updates with more details from speech)

WASHINGTON (Thomson Financial) - Federal Reserve Board Governor Randall Kroszner said today the Fed is closely examining comments it has received on its pending regulation designed to tighten mortgage lending standards, and will "consider" whether to relax key sections of its December draft rules before making them final.

One key aspect of the proposed rules is that mortgage loans with an annual percentage rate above a certain threshold will be subject to new restrictions. These restrictions include rules requiring lenders to verify income of borrowers, limit prepayment penalties, set up escrow accounts for taxes and insurance, and avoid a pattern or practice of lending money without considering the ability of the borrower to repay the loan.