This morning, the fund's CEO, Bruce Berkowtiz, was on CNBC explaining its plan.
"We don't have to be greedy, we don't need federal support," he told CNBC's David Faber. "We can give the president what he wants, we can give Congress what it wants... It seems pretty obvious."
Berkowitz is known for his "communication gift", and for taking a significant role in the restructuring of Bank of America and AIG in the aftermath of the financial crisis.
He's also known for having had a wild ride over the last few years. In 2010 Morningstar named him 'The Mutual Fund Manager of the Decade." In 2011, investors were redeeming their money in droves after the fund had a miserable year.
But now Berkowitz is back on the upswing. At the beginning this year Fairholme closed funds to new investors, later reopening in August.
Now here's what we know about Fairholme's Fannie/Freddie plan - The fund would raise $34.6 billion in exchange for preferred stock. The fund also wants $17.3 billion from preferred stock holders in a rights offering.
For the first five years of Fairholme's ownership of the insurers, it would pay no dividends or distributions with new, locked in capital. It may also decide to scrap the names Fannie and Freddie.
As Faber pointed out in the CNBC interview, it is unclear if the government would approve of this plan. At the same time, there is a desire in Washington to unwind Fannie and Freddie and change the way housing is insured in this country entirely.
"This proposal is about the future," Berkowitz said, later adding, "We are apolitical, we will do it any way government wants."
Both Fannie and Freddie's stock are up 7% on the news.