omething is terribly wrong with the roof of Virginia and Paul White's modest town house in Germantown. It ripples and sags from end to end.

From the inside, in the attic, the problem is apparent. The sheets of plywood under the shingles are disintegrating. Billowing inward, blackened and breaking off in chunks, they're being eaten away by the very chemicals that were designed to protect the roof, the house and its occupants in the event of a fire.

Almost all of the roofs on the 174 town houses in the Whites' Waring Station subdivision display similar symptoms. The crumbling plywood also has been found in tens of thousands of town houses, condominiums and garden apartments constructed elsewhere in the Washington region since the early 1980s, with perhaps up to 1 million homes affected throughout the eastern United States, according to the National Association of Home Builders (NAHB).

It will cost at least $2 billion to fix damaged roofs on residential buildings, according to industry estimates. But the problem doesn't stop with homes. Schools, nursing homes, office buildings, strip shopping centers and prisons built with fire-retardant treated (FRT) plywood have reported troubles with their roofs.

Problems have surfaced in Mobile, Ala. (the roof on a medical office building built with the treated wood collapsed); New York City (roofs on six prison buildings on Rikers Island are deteriorating); Connecticut (the Enfield Prison must spend $25 million to repair a disintegrating roof and an East Hampton community center must replace its sagging roof); Jonesboro, Ark. (a roof on a school had to be replaced); and East St. Louis, Ill. (a roof on a nursing home is crumbling).

"It's a big problem, a very big problem," said Bruce Blumberg, vice president of Abaris Realty Inc., which manages condominium projects in Montgomery County.

An unlikely combination of circumstances caused the debacle.

Building codes along the East Coast were changed, encouraging widespread use of plywood roofing that had been chemically treated to slow the spread of flames in a fire. Separately, several manufacturers of the chemicals changed their formulas. And while testing laboratories determined that treated plywood would do the job in a fire, no one apparently checked to see if the plywood would deteriorate in hot attics.

That, according to many independent experts, is what happened. "Essentially, the FRT wood undergoes a chemical reaction under high temperatures and some moisture that destroys the wood cells," said Louis Gaby, president of Wood Technology Services in Athens, Ga., who has examined several hundred roofs built with FRT plywood. "They no longer have their original strength."

The result is that the plywood darkens, weakens and becomes brittle. The deterioration usually occurs within three to seven years of installation, but it can also take place within months, according to the home builders group.

Danger on High Building experts say most roofs made with the defective plywood will not collapse on occupants because the roofs are being held up by a roof truss system that typically is made with wood that does not contain the fire-retardant chemicals.

However, there is plenty of danger for people whose job it is to climb on roofs: Maintenance workers, building officials and roofers have been injured when they have fallen through the weakened roofs. One roofer in Montgomery County was slightly injured when he plunged through a town house roof and the attic floor recently, landing in the master bedroom below. Firefighters have been warned about subdivisions with faulty roofs.

It also confronts homeowners with unexpected, costs to fix leaky roofs or replace plywood sheathing on the weakened roofs that have caved in under the weight of snow.

"The roofing trucks are circling," said Eugene Frantz Jr., who paid $2,300 to have the roof on his Alexandria town house replaced after roofers told him that even a 1-inch accumulation of snow on his roof this winter would cause it to cave in.

Private insurers and home warranty programs have generally refused to pay to fix the roofs -- among other reasons, they say it's not a structural problem covered by their policies or warranties. But some larger home builders are picking up the tab.

Pulte Homes Corp., which built about 16,000 town houses using FRT plywood, expects to spend up to $65 million to replace roofs that have deteriorated. In the Washington area, Pulte is replacing 500 to 600 roofs a month: It says it has 10,000 roofs to fix.

"It's a very expensive problem," said Greg Nelson, vice president of Pulte, based in Bloomfield Hills, Mich., which has filed suit in federal court in Florida against two companies that manufactured the FRT chemical formulations, as well as suppliers.

But many small home builders, confronted with the expense of replacing the roofs on hundreds or thousands of homes they have built since 1980, have told homeowners that they are on their own. In June, Montgomery County announced it would make low-interest loans to moderate-income homeowners who must replace a crumbling roof before this winter's snows.

The battle to pin responsibility on someone or something is in full swing.

Scores of lawsuits have been filed. Homeowners are suing builders, builders are suing plywood treaters, plywood treaters are suing builders. The lawyer for one FRT manufacturer said the company faces more than two dozen lawsuits.

Said Gary Komarow, senior staff counsel for the NAHB: "I don't think the courts are going to be free of FRT cases until well into the next decade."

The problem began in the early 1980s, when two unrelated events occurred:

First, the two organizations that write model building codes for the eastern half of the country, the Building Officials and Code Administrators International and the Southern Building Code Congress International, voted to allow roofs to be constructed using fire-retardant plywood. Previously, fire walls that jut out of the top of structures had been required on multifamily dwellings and steel had commonly been used on commercial structures.

The code changes were welcome ones for builders, who seized on the fire-retardant plywood as a less expensive and more attractive alternative to fire walls and steel. Home builders bought 672 million square feet of FRT plywood produced between 1981 and 1988 from various manufacturers, according to the builders, to use on town houses and other attached dwellings, as well as on commercial structures that were permitted by building codes to use it.

FRT plywood was not required on most detached homes, but there have been scattered reports of problems where builders used leftover FRT plywood from town house projects on single-family homes that they were constructing at the same time.

Few problems with FRT plywood have surfaced in Western states because most building codes in the West continued to require fire walls. Thus, little FRT plywood was used.

Second, at the same time that the building codes in the East were allowing the widespread use of FRT plywood, most FRT companies changed their chemical formulations, in part because of complaints that the chemicals used previously caused metal fasteners, such as nails and screws, to corrode, according to FRT company officials and roofing experts.

This second development has become the focus of the litigation. Builders and building experts have said that new chemical formulations introduced in the early 1980s by Hoover Treated Wood Products of Thomson, Ga., and Osmose Wood Preserving Inc. of Buffalo, were flawed. In the mid-1980s, Hoover had 80 percent of the FRT market in the East, according to NAHB estimates. The changes involved the use of ammonium phosphate compounds, considered to be excellent fire retardants.

The FRT companies vigorously deny those accusations, blaming builders and architects instead.

In court depositions, Hoover company executives have acknowledged adding monoammonium phosphate to their product, Pro-Tex, which was introduced in 1982. Osmose, according to company documents, used ammonium polyphosphate in its product, Flame Proof LHC, which was introduced in 1981.

While the new chemical formulations seemed to have solved a problem of corroding metal fasteners, they apparently created an unforeseen new problem: Experts say heat, either from the required drying process after treatment or from high temperatures under roofs in most of the United States, prematurely activate the ammonium phosphate -- a process the industry calls "premature thermal degradation."

That is, the ammonium phosphate, in the presence of heat and some moisture, undergoes a type of chemical reaction and becomes phosphoric acid. One of the principal effects of this process is that the wood darkens, a signal that it is in the beginning stages of the "charring" process that reduces its combustibility, and then weakens.

"They got the formula too right," said Joseph Lstiburek, who runs a Chicago company that investigates building problems. Lstiburek, who has researched the problem for FRT companies and builders, said that the FRT chemical formulations are doing what they're supposed to be doing, but at much lower temperatures than were envisioned.

A new report from the U.S. Forest Products Laboratory in Madison, Wis., is expected to bolster that argument. The government laboratory tested more than 7,000 specimens of FRT-treated wood at 130 and 180 degrees -- temperatures that are commonly reached by roofs even in cold climates -- and concluded that monoammonium phosphate had one of the worst reactions to wood of the chemicals that it tested.

"Our test data shows that monoammonium phosphate has more significant reductions in {wood} strength than other chemicals used," said Susan LeVan, project leader of the fire safety of wood products group at the laboratory. She said that either high attic temperatures or high-temperature kiln drying of the plywood by the companies could set off the reaction.

The FRT companies say that poor design and construction, which led to inadequate ventilation, are causing the roof problems. Builders, they say, created their own problems by disregarding warnings about how to use the product.

A Number of Factors Hoover President Barry Holden declined to be interviewed on the issue. In a statement, he blamed builders. "It appears that the cause of the deterioration is excessive moisture and heat in attics where builders had not followed instructions for FRT wood usage in interior applications, and improper construction techniques and designs did not provide for adequate ventilation of the attic spaces," the statement said.

Osmose places the blame on a number of factors. In some cases, it has claimed that the plywood got wet at construction sites, and it says that set off the reaction. "We have too many examples of successful usage for many years to conclude that the chemical formulations are flawed," said John Kozak, Osmose's vice president of business development.

LeVan of the U.S. Forest Products Laboratory said preliminary studies that will be released later this year show that "the role of moisture plays a part, but not as much as elevated temperatures."

Roofing experts retained by builders reject the argument that lack of ventilation and excessive moisture causes the wood to degrade. "Regular plywood roofs aren't rotting like crazy," said Lstiburek in Chicago. If the FRT companies were right, "we should be seeing as many problems with non-fire-retardant plywood as with fire-retardant plywood."

Lack of Standards Testing procedures for building products did not catch the alleged flaw. Underwriters Laboratories Inc., an independent product testing organization in Northbrook, Ill., tested the FRT plywood -- but only to make sure that the product met standards for such factors as the rate of flame spread and amount of smoke produced.

"We have no reason to test it for strength," said Howard Engerman, staff engineer for U.L.

The American Wood Preservers Association, a trade group that issues specifications for pressure-treated wood products, specifies impregnation and drying requirements for FRT plywood, but it has no standards on how strong it needs to be after sitting for an extended period of time in a hot attic.

"Nobody ever said, 'Well, gee, let's store it for three months at high temperatures and see what happens,' " said Joseph Shuffleton, president of Engineering and Technical Consultants Inc., a Sterling, Va., firm that specializes in building system problems and that has been investigating the FRT plywood problem for several years.

While denying their products were flawed, Hoover and Osmose have changed formulas again. Hoover introduced a new product, called Pryo-Guard, in 1988 and has said that monoammonium phosphate is no longer an ingredient in its new products. Hoover's Holden said in a court deposition that his firm introduced its new product "in part to take into consideration the poor construction we were witnessing in the field."

Osmose introduced a "slightly" different product last year that has been tested by an independent laboratory to determine its strength properties under high temperatures and high humidity, said John Kozak, the company's vice president of business development.

Few problems have been found with an FRT plywood treatment called Dricon, produced since 1981 by Hickson Corp. of Atlanta, although experts are still debating the issue. The product is about 20 percent more expensive than its rivals' products, but its share of the market nationwide has risen in recent years to about 45 percent, according to company spokesman Bob Lattanzi.

According to Hickson, its product is not subject to thermal degradation because it uses "organic" phosphate salts, which are more stable than other formulas. Lattanzi said that at least 140 million square feet of Dricon have been used in roofs since 1981 and "nobody's found a degradation problem."

Chemical engineer LeVan of the U.S. Forest Products Laboratory said that her tests show that Dricon did weaken the plywood at 180 degrees, but at just below the rate at which untreated plywood weakened.

"The Dricon had some {strength} reduction, but not as much as the monoammonium phosphate," she said.

Pulte Homes is using Dricon on the tens of thousands of roofs it expects to replace. Company executive Nelson said Pulte has conducted an extensive review of Dricon.

"We're not aware of any failure of their product," he said.

Germantown homeowner Virginia White, nonetheless, has her doubts about any type of FRT plywood. She doesn't want it on her roof. She said a builder has agreed to install a metal roof on her town house that will cost her more than $2,000.

"I want to put something up there so that if I do sell my house," she said, "the new homeowner will not have to go through what I have been through."