The sale of 1133 Owen Pl. NE is duly recorded in the official 1982 land records of the District of Columbia as if it were something real: a buyer, a seller, a price, a deal.

In fact, it was fiction. The buyer had phony credentials, the down payment was faked and the price was inflated by a fraudulent appraisal.

The fraud was set up to obtain two benefits: a federal mortgage loan guarantee and an exemption from the District's rent control law, both available only to small "mom and pop" landlords; both, had the truth been known, unavailable for this transaction.

The truth, according to statements by federal prosecutors when the perpetrators were successfully prosecuted, was that a group of speculators was behind the purchase, the same company that was at the same time buying virtually the entire block of Owen Place.

And the only thing real about this deal was the increased rents tenants ultimately were asked to pay, and the bill for $135,600 picked up by the taxpayers when the loan, predictably, went into default.

It began, according to court documents and interviews, when some real estate dealers realized that there were lots of properties to be sold in such neighborhoods but few prospective buyers. They fashioned an illegal scheme that, in essence, allowed them to offer irresistible terms: apartment buildings unencumbered by rent control, for no money down, with no risk.FHA Loan Guarantee

The linchpin was the Department of Housing and Urban Development's Federal Housing Administration One-to-Four Family Home Mortgage Insurance Program, a long-standing loan-guarantee program designed to help moderate-income families buy homes.

It permits home buyers to get mortgage loans with down payments as small as 3 percent, compared with the 10 or 20 percent usually required for conventional loans.

To qualify for the program, buyers must assure HUD in writing that the building contains four or fewer housing units, that they have the income to qualify for the loan, that they intend to live there, that the home is worth what they are paying and that they are making the agreed-upon down payment.

Unable to attract clients legitimately qualified for FHA backing, these dealers simply sought unqualified buyers, hundreds of them, and helped them invent qualifications.

To make these buyers appear credit worthy, they provided some with fake employment papers and false income tax forms. To meet the requirement of a cash down payment, the dealers often gave the buyers some of the proceeds of the government-backed loans they received.

To meet the FHA requirement that the buyer move into the building being purchased, papers sometimes were fabricated showing that the purchasers planned on leaving their suburban homes to live in the inner-city apartments.

To obtain a loan large enough to cover the cost of the fraud and make a good profit, the speculators sometimes procured inflated appraisals that exaggerated the worth of the properties by 10 percent to 80 percent.

Finally, in an attempt to pay off the inflated loans, the buyers had to raise rents dramatically. To do this, they had to get out from under rent control, which they did by claiming the exemption available to small landlords: owners of four or fewer units. In many cases, the claims for exemption were false, according to court documents, because the properties actually were controlled by other people.

It is uncertain who first concocted the scheme that was duplicated citywide, but according to court documents, one of the earliest uses of it was in 1981. Two real estate dealers, Ritchie Gaylen and Steven Madeoy, "began driving around together in various areas of Washington to select houses that Madeoy could purchase and sell."

The details of the sale of 1133 Owen Pl., taken from land and rent control records and a 1986 factual proffer in support of guilty pleas by several of the participants, illustrate how the scheme worked:

In 1982, Madeoy and his partner, Marvin Gitelson, trading as Bancies Inc., agreed to purchase the property for $48,000, arranging to delay the financial settlement until they could find a buyer.

Two months later, Madeoy's father, a Veterans Administration appraiser named Jakey Madeoy, appraised it for them at $69,000. Getting a Buyer

Ritchie Gaylen, an associate at Bancies, persuaded a Northern Virginia friend of his, Patricia Whiteoak, to act as the buyer at the inflated price.

According to land records, she paid $68,900 for the property, and purchased it with a $67,800 FHA-insured loan from Michigan-based Modern Mortgage Corp. According to the factual proffer, Whiteoak signed two contracts: The first, for official consumption, stated that she would put up cash from her own pocket, as required by the FHA. The second, an undisclosed side contract, stated that Steven Madeoy and Gitelson would kick back about $10,500 to cover her costs, according to court documents.

To show that she could afford the down payment, Gaylen helped Whiteoak obtain a fake gift letter stating that her sister was giving her $5,000 for the down payment. Lawyer Michael Friedman, of Potomac, Steven Madeoy's brother-in-law, prepared false documents showing that Whiteoak had made the required down payment.

A Modern Mortgage loan officer who was a party to the scheme provided the loan. HUD, relying on Jakey Madeoy's appraisal and the falsified paperwork, agreed to insure it. From the loan proceeds, the participants paid for the property, paid the settlement costs, paid Gaylen and a girlfriend of his about $7,800 and kept the rest as profit.

In fact, according to court documents and a Washington Post interview with Whiteoak, she owned the property only on paper. She had become what is known as a straw buyer. Gaylen managed the property, collected rents and paid the mortgage on it.

Gaylen's motivation in establishing Whiteoak as a straw buyer was threefold. He was able to purchase the property and profit from the transaction and it permitted him to raise the rents substantially.

Because he owned several buildings in the District, Gaylen could not otherwise qualify for an exemption from rent control, which is available only to those with a financial interest in four or fewer apartments.

So Gaylen also prepared papers for the D.C Rental Accommodations office stating that Whiteoak was the owner, and that she qualified for an exemption as the owner of four or fewer apartments. In March, the papers were filed and the rents in all four units increased to $275 a month, a doubling for two of the units.

Within two years, the property had gone into default and foreclosure, with HUD forced to take title to it in February 1986. The cost to the FHA insurance fund for the one property alone, because so few payments had been made, was $135,600, according to District land records, reflecting the combined total of interest, late payment charges, back taxes and legal fees. HUD recouped only $45,000 on the property when it sold it 22 months later, according to land records.

In April 1987, the Madeoys and Friedman were convicted of defrauding HUD through conspiracy, racketeering and bribery. Their conviction was upheld by an appeals court. Gaylen pleaded guilty to conspiracy and bribery of a public official and was given a prison sentence of 20 months to five years.

Gitelson, Madeoy's partner, admitted his role in similar cases; he pleaded guilty in July to two felony counts of interstate transportation of property taken by fraud and of making false statements to HUD. He has yet to be sentenced.

Patricia McAdams, the loan officer at Modern Mortgage, pleaded guilty to conspiracy and served three months in jail. The mortgage company was fined $2 million to compensate HUD for its losses in this and other cases.

No charges were brought against Whiteoak, who said in an interview that she did not realize at the time that her actions were improper.

The speculators who handled 1133 Owen Pl. used a similar scheme to sell eight other properties on the street: 1137 Owen Pl., 1140, 1141, 1145, 1148, 1149, 1152 and 1156, all four-unit brick apartment buildings, all housing low-income tenants, all fraudulently purchased.