The landlord of the building at 4729 S. Langley Ave. collected federal rent subsidies on this property, which ended up mired in foreclosure while chronically failing inspections. Photo by Jonathan Gibby.

When Johneece Cobb signed the lease on a two-story home two years ago, she had no idea that her landlord was keeping a secret.

It didn’t take long for her to suspect that something was wrong. The clues were subtle. Her landlord started ignoring her calls. And a strange guy showed up a couple of times to take pictures of the property.

Then, a manila envelope from Citibank arrived in the mail. It was addressed to Cobb’s landlord so, initially, she dropped it in his mail pile.

There was something about the letter that kept nagging at the 45-year-old community college student. One night, she tossed and turned, unable to sleep.

“Something just kept telling me, ‘Look at that envelope. Look at that envelope,’” Cobb said. “I got up at 3 o’clock in the morning, walked downstairs, got that envelope and I opened it.”

She found a stack of court documents. It turned out the property had gone into foreclosure—even before Cobb signed the lease. “I had no idea,” she said.

This was the second time in less than a decade that Cobb had been caught in the middle of a foreclosure. And it’s happened to thousands more unsuspecting Chicago renters since the housing market melted down in 2008. Most of their landlords, however, weren’t collecting federal rent subsidies, while falling short on their mortgages, as Cobbs’ was.

A joint investigation by The Chicago Reporter and WBEZ found that, since the beginning of 2012, landlords have cashed in on taxpayer-funded Housing Choice Vouchers, commonly known as Section 8, for renting nearly 1,550 properties that have been named in foreclosure filings. Those are just the newest cases. Since 2008, banks have taken over more than 2,400 properties that had been occupied by voucher holders before they were auctioned off in a foreclosure sale. All types of properties—from new condos to multiunit apartments and single-family homes—are involved. The bulk are on Chicago’s South and West sides.

The Chicago Housing Authority, which cuts the rent checks, screens landlords upfront when they apply to participate in the program, said Ellen Sahli, the agency’s chief housing officer. Because the voucher program is “tenant-based,” beyond that one-time screening, it’s up to renters, not the CHA, to figure out whether properties are in foreclosure before they sign a lease, she added. If the properties are in foreclosure, it’s up to tenants to decide whether they’ll move in anyway or search for a different apartment.

The CHA isn’t notified when properties fall into foreclosure, something that Sahli said that agency officials are looking at remedying. “I can’t at this time give a timeline on it,” she said. “I think these are all issues that are important to us, and we’re working hard to figure out what the right strategy is.”

Unless the unit fails to meet the CHA’s inspection standards, a landlord can continue to collect rent checks indefinitely while a foreclosure case winds through the courts, with no additional scrutiny. So long as their properties meet inspection requirements, landlords in foreclosure can continue to collect federal rent subsidies.

Cobb, who suffers from lung disease, is tethered to an oxygen tank. She has paid the price in being forced to move. It would have saved her a lot of grief, she said, if she knew upfront that the house near 84th and Sangamon streets was already in foreclosure. Cobb, who lives alone, said that, though she could not afford to move again, she had no choice. As the foreclosure dragged on, the house fell further into disrepair.

An inspector sent out by the CHA failed the property twice last fall. Water had pooled in the basement, the smoke detector stopped working and a light fixture on the front porch became an electrical hazard. The CHA issued her moving papers shortly afterward.

The Reporter found subsidized properties that are tied up in foreclosure often fail to meet the CHA’s health and safety requirements. Dating back to 2008, nearly six of every 10 buildings failed at least half of their inspections within a year of being foreclosed upon by a bank, the Reporter’s analysis of CHA inspection data found.

At the least, the CHA should be doing its homework on the landlords it contracts with before families are allowed to rent the subsidized units, said Tamiko Holt, the president of the Housing Choice Voucher Residents Advisory Council, a tenant-led group that represents CHA voucher holders.

“If they did that, then tenants wouldn’t [be] faced with, ‘Oh, I’ve only been here three or four months. Now I’ve got to go because this property was going into foreclosure,’” Holt said.

It’s been eight months since Cobb was forced to move. She’s still trying to get her security deposit back from her former landlord. The landlord could not be reached for comment.

She has since moved to another subsidized unit in West Pullman and recently discovered that her new landlord is behind on his mortgage payments as well, she said. But her most immediate concern is the mold growing in the apartment—which she says has made breathing even more difficult.

Despite the upheaval, Cobb says she’s grateful for the housing voucher. “I can’t afford to live if it weren’t for Section 8,” she said.

“But the way the program’s being run,” she added, “Sometimes, it feels like it’s hurting me as much as it’s helping me.”