In the early 1980s, when the flower gardens dwindled in her Northeast Washington neighborhood of Trinidad, Korea Strowder, 70, knew something was amiss. In place of the flowers, for-sale signs sprouted, "popping up all over the place."

Strowder watched with alarm as longtime renters moved away or were evicted. "It seemed," she said, "to be a mass exodus."

It didn't make sense to Strowder. For building after building, the final act was the raising of rents, the resulting displacement of tenants, deterioration, foreclosure and sometimes abandonment. Some buildings, police and residents say, ended up as crack houses.

Only now, nearly a decade later, has it become clear that the cause of Trinidad's devastation was the largest real estate fraud of its kind in Washington's history. Real estate speculators bought apartment buildings covered by city rent control law and, using illegally obtained federal mortgage insurance, made quick profits by re-selling them at inflated prices to friends and associates, who then could evade rent control and raise the rents.

It was made possible, in part, by a lack of vigilance at the Department of Housing and Urban Development and has cost the government tens of millions of dollars. More significant, it has cost Trinidad its vitality as a neighborhood.

It is the human cost of the HUD scandal of the 1980s.

Since 1987, at least 36 people have been successfully prosecuted by the U.S. Attorney's Office in Washington for their roles in fraudulent real estate deals in Trinidad and other inner-city neighborhoods. More are expected to be charged.

Almost all have pleaded guilty rather than face trials. The prosecutions have focused on about 250 properties, but experts estimate that 2,000 District apartment buildings changed hands fraudulently during the '80s.

Trinidad, located between Gallaudet University and the National Arboretum, about a mile northeast of the Capitol and just south of New York Avenue, is still a pretty neighborhood, a neighborhood with potential. At its center are several winding, tree-lined blocks adjacent to Trinidad Avenue, the street for which the neighborhood is named. Small, four-unit apartment buildings and two-story row houses are arranged there in an orderly fashion.

Trinidad took on much of its present appearance during the World War II era, when builders rushed to erect inexpensive housing for blue-collar and lower-income workers. Eventually, in the classic pattern of American cities, blacks started moving in and whites moved out.

By the late 1970s, Trinidad, though troubled by crime and poverty like other inner-city neighborhoods, was a relatively stable community for homeowners and renters. Almost all the residents were black, and about three-quarters of them were renters. A 1973 survey found that most of them liked it there and hoped to stay.

The apartment buildings then were owned, generally in large blocks, by longtime landlords or their estates. But rent control, first implemented in Washington in 1974, limited their income from the apartments: Artificially low rents were great for the tenants but didn't go very far after mortgage payments and rising maintenance costs were paid. The owners kept up with their mortgages and the foreclosure rate was low. But they were ready to sell.

Meanwhile, with gentrification creeping north from Capitol Hill, a group of real estate brokers saw opportunity in Trinidad. They were aware that properties there could be purchased cheaply and turned around immediately at inflated prices, but finding qualified buyers to take the risky properties off their hands was another matter. Then they found the gimmick they needed: Through the Federal Housing Administration's loan guarantee program, they could pass that risk to the federal government.

To qualify for FHA guarantees, they provided the agency with false data about the buyers and the properties. The purpose was to give bad investments the appearance of good investments.The Road to Foreclosure

The technique virtually guaranteed foreclosures in the neighborhood. Although the dealers could dress up bad investments to look good, the overpriced buildings were still bad investments. They could not squeeze enough income from them to sustain the government-backed mortgage loans.

They tried, to be sure, by evading rent control and raising rents dramatically.

Under District law, individuals who have a financial interest in four or fewer units qualify for an exemption from rent control, so the dealers often found buyers who could act as individual landlords, hiding the true control of the apartment buildings. But rent increases usually didn't help. Few of the old tenants could afford the new rents, and few new tenants could afford to take their places.

In just a few years, the neighborhood changed from a community of "stable, churchgoing people, where everybody knew everybody and every family knew every family," into a place of people "coming and going," said Romaine Thomas, who was born and raised in the community.

At least 90 small, four-unit apartment buildings in and around Trinidad were illegally purchased between 1982 and 1985. Some blocks were hit harder than others, with investors moving up one side of the street and down the other, buying the properties, inflating the prices, raising the rents.

On Trinidad's Montello Avenue NE, for example, a street that cuts through the heart of the neighborhood, 1311, 1315, 1631, 1635, 1639, 1643, 1644 and 1648 were purchased this way, according to court documents.

The heavy turnover produced some striking anomalies. The number of property sales in the Trinidad area jumped 58 percent between 1983 and 1984 and prices shot up 18.5 percent, according to statistics provided by the D.C. Department of Finance and Revenue. Tax assessments increased accordingly.

In neighborhoods unaffected by the fraud, including affluent sections such as American University Park, Georgetown and Mount Pleasant, average home prices rose by 2 percent or less the same year, according to the statistics.

The official records of the transactions show a startling pattern. A speculator would buy a property and sell it for 30 percent to 80 percent more than he paid for it, to a buyer who seemed immediately available. Both transactions often occurred on the same day.

Shortly thereafter, the new "buyer" would file for an automatic exemption from rent control granted to individuals who have an interest in four or fewer units. The exemptions were obtained by listing the properties in the name of the buyer of record.

Of the 90 Trinidad area properties studied by The Washington Post, at least 73 were pulled from the rent control program.

In some cases, the new owner claimed an exemption from rent control before having title to the property, according to land records. Documents filed with the D.C. Rental Accommodations Office, for example, show that one buyer filed for and received an exemption from rent control on Oct. 12, 1983, for a building at 1200 Oates St., one of the properties identified in court documents as having illegally changed hands. Land records did not list her as the property's owner until November of that year. Raising the Rents

Rent increases followed. In 1981, the average rent for the area's modest, one-bedroom apartments was about $125 a month. By the end of 1983, the same apartments were being rented for $275 to $320 a month.

At 1631 West Virginia Ave. NE, for example, the rent climbed from $167 to $275. The rent at 1826 Rosedale St. NE jumped from $144 in 1983 to $517 by 1989.

At 1265 16th St. NE, two one-bedroom apartments each rented in 1982 for $95 a month but by mid-1989, after being removed from rent control, the rents had climbed seven-fold to $700 each -- roughly comparable to rents being charged in pricey neighborhoods such as Dupont Circle and Adams-Morgan.

The human impact was almost immediate. Carrie Owens, 74, a retired domestic worker, had lived with her husband in a one-bedroom apartment at 2006 Rosedale Ave. NE for 15 years when they got the word that their monthly rent was increasing from $138 to $400.

She and her husband were unable to pay and were forced to move, separating themselves from longtime friends in the neighborhood -- all of whom also were forced to move by the same groups of investors.

"We'd been there so long," Owens said, reminiscing about the generous closet space and the pretty yards that once were there. "It felt like home."

Owens, like all the other tenants, was unaware of the speculation and fraud that occurred in Trinidad until she was interviewed for this story. All she knew was that somebody had bought the building and raised the rents.

In her case, according to court documents, the deal was rigged by real estate investor Ndide Obaze, who since has admitted that he submitted falsified documents to HUD officials in connection with the sale. Obaze participated in nine such deals, earning $140,000 in profits, according to court documents related to his guilty plea to felony counts of conspiracy and making false statements to HUD. Last summer, Obaze was sentenced to one year in prison.

Residents and investigators report that even as the rents increased, many buildings deteriorated. Investigators who later visited the affected buildings reported broken pipes spewing raw sewage into darkened hallways, rotting stairs, and inoperable kitchen faucets.

"In some buildings we went into, we weren't even sure the floors would stay," said Harry A. Horstman III, a real estate appraiser who visited many of the properties several years later as an expert witness for the Justice Department. "We went into properties where there was raw sewage flowing out the back door. We went into buildings that were shooting galleries."

Among the most disturbing sights he saw were long-term tenants, often elderly, trying hard to live decently amid the squalor. Two people in particular stand out in his mind: an old man whose back stairs had so thoroughly rotted that he had to take his garbage out the front door and carry it around back, and an elderly woman whose adult son arrived to paint her apartment shortly before she was evicted.

"Many of the units I inspected were occupied by people who'd lived there a long time -- elderly people . . . . Even with the neglect of the properties, the individual units were well-maintained, even though the building owners had no interest except making a buck," Horstman said.

In February 1985, an inspector sent to view a property at 1200 Oates St. NE for a mortgage company found a woman and her two children living there. Although the property had been foreclosed upon, she was still paying rent to the former property manager, according to the inspector's report.

"I don't know how she can stay in such a place," the inspector wrote. "There are no lights upstairs or down." Water streamed from the ceiling and from broken radiator pipes, spilling out of the apartments and into the halls. Electrical lines rested in the pools of water.

The property, the inspector noted, is "really dangerous."

The deterioration, as well as steep rent increases, finally forced Sammy Nimmons, formerly of 1141 Owen Place NE, to move. His rent rose from $225 to $495, although no improvements had been made to the building.

Nimmons, a retired federal employee, resettled last year because he could no longer pay the rent and because the living situation had become so grim.

"They never painted and they never did nothing," Nimmons said. "They never did nothing to it. The back porch was hanging off the wall. They never did nothing -- but raise the rent." Evictions, Exodus

Figures on how many tenants came and went have not been compiled by any agency. A study of the Haines Criss Cross Directory for the neighborhood shows that roughly two-thirds of 110 tenants living in the affected properties in Trinidad in 1982 were gone by 1984.

Many had lived there a decade or more.

Carrie Owens said not a single person who lived on her block in Trinidad remains six years later. "Everybody had to get out," she said.

Longtime Trinidad resident George Boyd, president of the local Advisory Neighborhood Commission, remembered with sadness the increase in evictions, the sudden proliferation of heaps of personal possessions piled outside the red-brick apartment buildings.

Adelaide Miller, a Washington foreclosure lawyer, compared it to an "earthquake," because of the number of people forced to leave their homes. "When an earthquake hit San Francisco and left people homeless," she said, "everybody recognized it as a disaster and they sent millions in relief. But in the District, the disaster happened one by one, and nobody even noticed."

With tenants not paying rent, or leaving in droves, the owners quickly defaulted on their loans. A Post study of land and court records shows that two years was the standard time between purchase and foreclosure.

The pace of evictions was accelerated by HUD's involvement. When the owners defaulted on their mortgages, the lenders foreclosed on the properties. Then, because the loans were insured through the FHA program, the lenders would contact HUD to be reimbursed for their losses and convey title to the properties to HUD.

But under long-established HUD policy, the government agency would pay the losses and take title only if the properties were vacant. The policy is intended to minimize HUD's losses and make it easier to re-sell buildings.

"HUD's general rule," said Thomas McCarron, a lawyer who specializes in foreclosures, "is, 'Don't even talk to us unless it's vacant.' " Drug Dealers Move In

Some of those who left moved in with friends or relatives. Others are believed by neighbors and community leaders to have become homeless. Local residents, including Korea Strowder, said that some of the elderly people who were forced to move died soon afterward.

Of the 90 properties in and near Trinidad that were fraudulently purchased between 1982 and 1985, nearly half had gone into foreclosure by 1989. Under HUD's management, many of the buildings were left vacant and untended for years.

Many residents said the foreclosed and abandoned properties that fell into HUD's hands became easy prey for vandals and drug users.

"Once HUD puts its notice on the door, it's open season," Horstman said. "There's no one there to check on it."

With many of the older, more established residents removed from the neighborhood, Trinidad rapidly deteriorated. Newcomers moved in, often transient people who had been displaced from other parts of the city. Some of them allowed their apartments to be used as drug storehouses, police and local residents said.

Some longer-term area residents, including Rayful Edmond III, convicted leader of one of the city's largest cocaine distribution rings, found the environment conducive to their operations.

"It really destroyed that neighborhood," said tenant lawyer Eric Rome. "It's a drug haven now. A lot of the old families have moved out and the drug lords moved in."

For homeowners and renters who somehow managed to stay, life has changed dramatically in Trinidad in the past five years. Abuse of the FHA program, which was created to help provide decent, afforable housing for Americans, has contributed to the decline of what once was a stable neighborhood.

Strowder, for example, a Trinidad resident for more than 40 years, spent a recent sunny afternoon sitting behind the new seven-foot fence that protects her back yard from intruders, talking with her husband about making themselves safer by installing metal bars on the second story of their two-level row house.

"We're having to bar ourselves in here," Strowder said. "We're kind of locked in, locked in and forgotten."

What has happened to the neighborhood, she said, is "so unfair. So terribly unfair." NEXT: The real estate frenzy