Bhaviesh and Varsha Shah bought their dream home in a new development east of Los Angeles two years ago, planted flowers around an emerald lawn and picked out wicker furniture for sitting outside on cool afternoons.

Today the view from their porch is a street pocked with boarded windows and dead lawns -- homes now repossessed after buyers failed to make mounting mortgage payments.

The Shahs live on a street with 10 large homes of 3,000 square feet or more, four of them now in foreclosure.

Although they are surviving the mortgage meltdown, their dream development -- like many in this arid corner of Southern California known as the Inland Empire -- is an early casualty.

We're not surprised. We had a feeling it was coming, said Varsha Shah.

They found out which way the wind was blowing about a year ago when several families moved into some of the homes and never bothered to water the grass or pick up beer cans. Unlike the Shahs, they didn't seem to be in Towne Square and its 49 Spanish-style and 1920s-inspired Craftsman homes for the long haul.

The Inland Empire, 50 miles east of Los Angeles, was a latecomer to the housing boom in California as buyers squeezed out of high-price coastal Los Angeles and Orange counties found large homes going up on the region's vast supply of vacant land.

And it has been one of the most hard hit by foreclosures.

The Inland Empire's combined Riverside and San Bernardino counties reported the fourth highest number of foreclosure filings of any of the nation's 229 largest metro areas in July, behind Atlanta, Los Angeles and Detroit, according to market tracker RealtyTrac.

OWNERS GO 'UPSIDE DOWN'

Survivors of Towne Square find themselves not only with unsightly, empty properties next door, but also with home values plummeting amid the fire sales on foreclosed homes.

So selling and moving to a better neighborhood is not much of an option because many owe more on their mortgage than they would get for the sale -- what the industry calls upside down.

And real estate agents note that California's market is likely to rebound as it has in the past, underpinned by high population growth.

Everything goes in cycles. I think we'll be OK if people don't panic, said Patricia Patton, who has been a real estate agent in the area for over 14 years.

Joe and Mary Gordon don't feel much like sticking around, but have little choice.

They bought an approximately 4,000 square-foot (371 sq meter) home on the street behind the Shahs for $741,000, thinking it would be their last home after moving from Orange County, just west of the Inland Empire.

Two homes on the Gordon's street are going through foreclosure and one of them, comparable in size to theirs, is being offered by the bank for $550,000.

The Gordons fear they will lose hundreds of thousands of dollars in equity. We have no recourse. We'll have to live here eight to ten years before we get our equity back, said Joe.

Bob Taylor, president of the development's homeowners association, said his family thought about moving, but with the installation of a pool and landscaping, they didn't think they would break even after the market turned south.

The frustrated families stuck in Towne Square are critical of the developer Centex Corp. for failing to exclude investors and scammers who bought 14 to 17 of the 49 homes in what was billed as a family centered executive development.

Centex has discouraged speculative investments in our primary-home neighborhoods, Eric Bruner, Centex's director of public relations, told Reuters in response to homeowners' complaints.

CHARLES MANSON

The families believe the investors were not just people flipping houses for a quick profit, but also a group of scammers taking advantage of lax lending rules that permitted 100 percent financing with no money down and minimal documentation.

For the Gordons and Taylors, these are the people who ruined the neighborhood by using their homes like revolving night clubs, cramming cars into the cul de sacs and threatening neighbors who complained.

The Corona Police Department said it was called about neighborhood disturbances on Towne Square's Summerset St., where the Shahs live, 35 times in 2006. The street that runs parallel, Springfield Circle received 28 complaints.

How did we feel? Sick! Joe Gordon yelled, throwing up his hands. We'd go to work, then just come in the house and hide. You never knew what was going to happen.

Now, many of the investors have disappeared and their homes have gone into foreclosure.

Despite the bad days spent in Towne Square, Bob Taylor said his family of six is here to stay and even optimistic that nice, responsible neighbors will eventually move into the foreclosed homes.

After what we've been through for the past two years -- short of Charlie Manson moving in -- it can't be any worse, he said, referring to the famous American murderer.

Los Angeles California Mortgage