This definitely is not problem with gnome-flashback, at login screen gnome-flashback is not started.
Don't know if that will work for you, but once it worked for me. You could try to copy your working /home/{your-user}/.config/monitors.xml file to /var/lib/lightdm/.config/monitors.xml. If that does not help remember to delete it from /var/lib/lightdm/.config
Other option might be to create /etc/X11/xorg.conf with correct configuration. Or if you already have one then maybe try to temporarily remove it.
Since you say that happens after updating to xorg/xserver-hwe-16.04 that could indicate that this is bug/regression in xorg.
This definitely is not problem with gnome-flashback, at login screen gnome-flashback is not started.
Don't know if that will work for you, but once it worked for me. You could try to copy your working /home/{ your-user} /.config/ monitors. xml file to /var/lib/ lightdm/ .config/ monitors. xml. If that does not help remember to delete it from /var/lib/ lightdm/ .config
Other option might be to create /etc/X11/xorg.conf with correct configuration. Or if you already have one then maybe try to temporarily remove it.
Since you say that happens after updating to xorg/xserver- hwe-16. 04 that could indicate that this is bug/regression in xorg.