MCGEE'S CROSSROADS - When flames destroyed Tricia Warner-Peterson and Scott K. Peterson's dream home in January, the fire consumed their children's baby pictures, mingled his parents' cremated remains with other ashes and turned their kitchen into a Salvador Dali-esque scene of melted appliances.

But to the neighbors who stood and watched as 61 Shepherd Drive burned, it was another in a long string of disturbing incidents that have them worried about the value of their homes in a small Johnston County subdivision called Cottonwood Forest.

The charred house is now boarded up with plywood, spray-painted with expletives. Laundry, which Warner-Peterson chucked out of the house's windows, is strewn across the lawn. And a broken toilet bowl in which the Petersons once planted pansies adorns the porch.

"I feel like I've moved to a third-world country," said Kristine Ryan, who lives across the street.

Although the Petersons have not made mortgage payments since July, they technically still own the house. Until the drawn-out foreclosure process ends, there's little anyone can do to stop them from treating the property however they wish.

It's an extreme example of what can happen to neighborhoods as the tide of foreclosures rises across the state.

Neighbors say they feel like victims of a crime that no one's willing to do anything about. Even though the Petersons have moved away from the subdivision to a place they won't divulge, their former neighbors feel trapped by the wreckage they left behind.

"We cannot sell our homes," said Ryan, who moved to the subdivision from Boston a year ago with her husband, Mike. "We cannot leave."

Mental illness spurs debt

Warner-Peterson, 38, who grew up in Cumberland County, blames herself for falling behind on mortgage payments. She said she receives treatment from Cape Fear Valley Health System for her bipolar disorder with some symptoms of schizophrenia.

"A lot of this has to do with my illness," she said. "Sometimes it's spend, spend, spend without a whole lot of thought."

The couple and their two children moved to North Carolina from California in 2005 a few years after Scott Peterson's mother died. They had some extra cash from the sale of his mother's house.

The Petersons first lived in a $149,000 home in Johnston County, but they craved something better. In April, they bought a new home in the Cottonwood Forest subdivision at McGee's Crossroads for $186,000 with add-ons such as an insulated garage. They also invested about $10,000 in other upgrades, including hardwood floors and a Jacuzzi.

"I've always handled our money," Warner-Peterson said. "Most of the time that goes pretty well. ... This is just the time it all went south."

Peterson said she went through a manic phase of binge shopping. Usually the kind of person to buy from clearance shelves, Peterson said, this time she was set on filling her home with the things they had always dreamed about.

She chose a safari theme for the room of her 10-year-old son, Richard. It had a cheetah-print bean bag, jungle wallpaper and fish in an aquarium. For her 8-year-old daughter Katie's room, she chose furnishings with a Tinker Bell theme, including a sleigh bed. The family also bought a $1,500 hand-carved Amish dining table, an LCD television and a new car.

As the Petersons were racking up debt, their relationship with the neighbors was rapidly turning sour. Neighbors complained about the Petersons' tow-trailer and their barking dogs. In August, they opposed the family's putting contents of their garage on the front lawn under tents as they painted the interior for a possible eBay business. Some sent notes, addressing the Petersons as "White Trash" and demanding they clean up.

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