Husband called our neighbor a dumb bitch

Me and my husband stick to ourselves. We don't really talk to many neighbors. Especially since the neighbor right across from us is extremely nosey, unhinged and annoying. We have been fostering animals. Right now we are fostering a pregnant cat. My husband is Hispanic. I'm white but speak fluent Spanish and we speak a lot of Spanish in the house. I found out that our neighbors dog went missing and she started a rumor that we stole our dog. She knocked on our door asking if we've seen her dog and tried to look into our home and I said no. She asked if she could come look around and I said no. That's weird. You're not coming in our home. This Karen was convinced we had our dog and I asked why she even thought that and she asked why my husband always has different pets coming in the house. I said we foster. She accused me of lying and I tried to close my door and she said she's going to call the cops. I asked for what and she believes we have her dog... And that my husband ate her dog.... Someone watched the presidential debate. She's yelling at me and my husband comes to the door because he hears everything. She tells my husband "No hablo esponol sorry!" Which my husband said "Yeah I speak English." Get the fuck off my property. She keeps yelling at us. She's unhinged. Then starts threatening to call ICE on us if we don't tell us where her dog is. My husband tells her to do it because he's Puerto Rican. She tells him get out of this country and she doesn't want to be near an immigrant. My husband told her "Sorry. I didn't realize I was talking to someone who dropped out of 7th grade and is a dumb bitch." And he slammed the door. I am so embarrassed of the entire encounter and we live right across from her. I feel like I can't leave my home anymore because other neighbors heard everything and it's so embarrassing. I told my husband next time let's just be the bigger person. My husband said no. If someone's is gonna act like a dumb bitch he will call them a dumb bitch. I just wanna cry because I don't like the feeling of shame and I feel so much shame.

Edit: I'm not saying she didn't deserve. But I hate confrontation and I just want problems to go away. I get embarrassed super easily.

Edit2: You guys are right. I am in therapy to work through my anxiety and my shame because I do tend to feel shame even if I shouldn't