The tension between Mayor Allan Fung and city Democrats came to a head again last week when Democratic City Committee Chairman Michael Sepe scolded the administration for a veto on an ordinance that would assist homeowners facing foreclosure.

“How can you? People are just so desperate right now and this is trying to keep people in their house,” Sepe said in an interview Monday.

There were more than 350 foreclosures in Cranston last year alone. The ordinance, which was proposed by city-wide Councilman Mario Aceto, gives borrowers the chance to negotiate some of the terms surrounding impending foreclosures (such as length of the borrowing term), and ensures that they are given ample warning before such a situation arises. A similar ordinance was passed in Providence.

“There are thousands of mortgage companies that are just treating people the way they shouldn’t be treated and we were thinking this could slow the foreclosure rate in the city,” Aceto said.

The catch, however, is that it’s not exactly legal.

“Is it legal? Probably not,” Sepe said, adding, “It’s not illegal until somebody takes them to court.”

Herein lies Fung’s objection.

“While he is correct, it doesn’t make it right,” he said, acknowledging that technically, Sepe is right. The Council’s word is taken at face value until overruled by a court of law. “We took a pledge to uphold the law. It contradicts existing state law.”

A lawyer, Fung said that passing illegal ordinances sets bad precedent, and whether it helps residents in theory or not, is harmful to the process. He made his veto after consulting with Deputy Solicitor Evan Kirshenbaum, who was concerned about the legal ramifications as well.

“I understand the plight that these people are going through, but this is not the legal way to go about it,” Fung said, adding that legal fees the city would incur in fighting the issue are enough to vote against it. The existing mortgage agreements contain the state law on right of sale, and those two parties have agreed upon the terms when they enter into that contract, he says.

“As a lawyer and as mayor I’ve got to make sure we pass valid ordinances that can stand up in a court of law.”

Sepe doesn’t believe it would come to that.

“I think a lot of the mortgage companies will along with this because they don’t have the best image right now. These banks and mortgage companies will not take this to court,” he said, questioning why the mayor would take on the role of the courts in his objection.

“Who is Mayor Allan Fung to challenge it? He isn’t [Chief Justice] Frank Williams. I’m shocked at the mayor,” he said.

Considering the unscrupulous reputation of mortgage lenders in the wake of a nationwide foreclosures crisis, Sepe believes these companies are too smart to spark a public relations nightmare. During his 10 years on the City Council, Sepe said he also pushed forward legislation that was not technically legal. Moreover, he says, the banks and lenders would rather work out a plan with homeowners than foreclose and lose money in a market where it’s tough to be selling homes.

“Providence hasn’t been challenged yet,” Aceto pointed out. “I just think this was a good first start.”

Fung says it’s important to think about the long-term consequences, though. He thinks that the ordinance could have a negative impact on future borrowers as lenders tighten up their guidelines.

The mayor equated it to the original proposals surrounding smoke-free public areas. Cranston was on the forefront of that issue, but until it was enacted statewide, Fung said it would have put the city in a bind. That too, he said, is the case with the foreclosure ordinance.

“This is an issue that needs to be addressed at the state level,” he said.

Council democrats believe there’s no time to waste when it comes to lending a hand to residents in dire times. Sepe says things are bad and could get worse.

“We’re usually the first state in the country to go into a recession and the last state to come out of it,” he said.

The fight became personal as well, when Sepe brought up Fung’s time as a State House lobbyist for MetLife Insurance. He questioned if the mayor was facing a disconnect between politics and the needs of residents.

“He should be dedicated to the people of this city. This is people-oriented,” he added.

That, the mayor says, is unfair and untrue.

“I think that’s absolutely ridiculous when you look at some of the issues I’ve tackled in housing, but in the right way,” he said.

He cites low interest loans for community development projects, low to no interest loans for first time homebuyers and closing assistance, as well as securing added funds to heating assistance as some of the tough issues he has tackled in the interest of his constituents.

“If I’m as heartless as Mr. Sepe says, why would I be putting forward these programs?” Fung asked. “I’m certainly for helping people in times of need but there’s a right way to do it.”

The Council will have the opportunity to override the mayor’s veto at an upcoming meeting, however, which all parties agree is likely. Aceto said he would be willing to work with the mayor to come up with appropriate changes, but believes the ordinance would go through either way.

“I believe there’s going to be enough votes to override it,” he said.