Fairholme Capital Management has proposed to buy the insurance businesses of Fannie Mae and Freddie Mac, a move that seeks to resolve the uncertain future of the mortgage financiers by freeing them from U.S. government control.

Bruce Berkowitz's Fairholme said it wants to buy the mortgage-backed securities insurance businesses of Fannie and Freddie by bringing in $52 billion in new capital.

The recapitalization plan seeks to raise about $34.6 billion in exchange for preferred stock, and at least $17.3 billion from preferred stockholders in a rights offering.

The companies, which own or guarantee about two-thirds of all U.S. home loans, were seized by the government at the height of the financial crisis as mortgage losses threatened their solvency.

Lawmakers on Capitol Hill have said they are intent on winding down the companies to ensure taxpayers will never be on the hook for big mortgage losses again.

Fairholme said late on Wednesday that its proposal would pave the way for the liquidation of Fannie and Freddie, ending their Federal charters and special status, without losing the value of operating assets critical to the mortgage market.

No dividends or distributions would be paid using the new capital during the initial five year period when the capital and retained earnings would be locked in, Fairholme said in a statement.

The mutual fund company also plans to scrap the names "Fannie" and "Freddie" if and when the deal goes through.

"This proposal answers the broad bipartisan call for private capital in a way that can advance reform from concept to a viable, sustainable solution. Fannie and Freddie's business model was not consistent with insurance industry best practices," said Bruce Berkowitz, Chief Investment Officer of Fairholme Capital Management.

Fairholme's proposal requires the support of Federal Housing Finance Agency (FHA), the U.S. Treasury, and other investors in Fannie and Freddie. This could be tricky as various stakeholders continue to wrangle over the role of the two mortgage giants.

The sizable profits the two companies have enjoyed in recent quarters have led some investors to speculate that they could be spun off again as private firms.

But Republicans and Democrats in the U.S. Congress, as well as President Barack Obama, have all called for replacing Fannie Mae and Freddie Mac with a new housing finance system.

Fairholme's proposal also comes months after it sued the government over the bailout terms of the two mortgage giants.

Fairholme's lawsuit filed in July claims that changes to the bailout terms set for Fannie Mae and Freddie Mac unlawfully impair shareholder value.

The lawsuit, which was filed in the U.S. Court of Federal Claims, seeks "just compensation" for the fund's investors.