When the housing market was collapsing in 2008, government-supported housing finance agencies Federal National Mortgage and Federal Home Loan Mortgage, aka “Fannie Mae” and “Freddie Mac,” were dying for cash amid swelling numbers of mortgage defaults and delinquencies. Even issuing $34.6 billion in preferred shares to try and drum up capital could not save the agencies and the government ended up putting them under the conservatorship of the Federal Housing Finance Agency.  The plan at the time was just to keep them under government control until the housing system re-gained strength and provided solvency again.

Together, Fannie and Freddie guarantee about 85 percent of all new mortgages in the U.S.

In order to keep the companies afloat, the government delivered nearly $190 billion, a loan which is on pace to be completely repaid early in 2014. Last week, Fannie Mae reported $8.7 billion in net income during the third quarter and $8.6 billion in comprehensive income, a stark increase from $1.8 billion and $2.6 billion, respectively, in the third quarter last year. Fannie is making a payment in December to the Treasury of $8.6 billion, meaning it will have paid back $114 billion of the $117.1 billion in bailout funds.

Fannie Mae chief executive Tim Mayopoulos commented that it was evident that the company has “righted the ship.”

Freddie Mac reported third-quarter net income of $30.5 billion, with the vast majority coming from a tax benefit of $23.9 billion. With a scheduled payment of $30.4 billion to the Treasury next month, Freddie will have repaid U.S. taxpayers $71.3 billion of the government’s $72.3 billion holdings.

So, five years, a much better housing market, and soon-to-be repaid loans, Fannie and Freddie are still under government control with politicians squabbling over the best policy for housing finance reform. The other reason that Capitol Hill probably isn’t in a rush to agree upon the future position of the government in the mortgage business is because Fannie and Freddie have turned into a cash cow for the Treasury, much to most everyone’s surprise.

They companies won’t stay in the government’s hands much longer if a group of hedge funds and private-equity firms have anything to say about it, according to a report from the Financial Times on Wednesday. The investor group, which includes Claren Road Asset Management, Paulson & Co., Fairholme Funds and more, hold more than 50 percent of the $34.6 billion in preferred shares in Fannie and Freddie. The group is reportedly putting together a proposal to take over a large part of the companies and inject them with fresh, private capital.

In the deal, the group would take control of Fannie and Freddie’s core businesses of guaranteeing new mortgage-backed securities, while the government would keep control of a common securitization platform and already written guarantees and mortgage holdings until they could be wound down.

This is obviously still a very dynamic situation, only breaking into the public’s eye today, but how it is handled going forward is certainly worth the watch as the government could be getting some pressure to execute reform. It also hearkens the question of whether or not the government trusts Wall Street enough to hand over its valuable asset that has generated billions in profits to a group of hedge funds and private-equity firms.