(Reuters) - Fairholme Capital Management has sent letters to the boards of U.S. government-controlled Fannie Mae
Fairholme, founded by fund manager Bruce Berkowitz, wants the mortgage companies to stop borrowing funds to pay dividends to the U.S. government, preserve its non-cash assets and establish procedures to address conflicts.
Fairholme also wants the companies to relist on the New York Stock Exchange and hold annual shareholder meetings saying, "Frankly, it has been a while."
The companies, which own or guarantee 60 percent of all U.S. home loans, have not held an annual shareholder meeting since their bailout five years ago.
Fannie and smaller sibling Freddie have operated under federal conservatorship since 2008, when the government bailed them out at the height of the financial crisis.
Since then, the two companies have posted record profits, helped by a housing recovery that has lifted prices and kept a lid on defaults.
Fannie, Freddie and Fairholme were not immediately available for comment.
The government pumped in about $188 billion between 2008 and 2011 into the two companies and collected $202.9 billion for its support. It has warrants to buy about 80 percent of the mortgage giants' common stocks.
Investors, including Fairholme and Perry Capital LLC, have sued the U.S. government, seeking a reduction in federal stake as Fannie and Freddie are returning profits to taxpayers.
Fairholme has argued that a 2012 decision that requires Fannie and Freddie to sweep all future profits into Treasury coffers is illegal and costs investors billions of dollars.
"Any notion that the answer to Fannie and Freddie's pre-crisis problems is more government involvement is just as flawed as the idea that the United States economy can properly function without their core businesses," Berkowitz said in Fairholme's letter to the boards.
The fund also wants the companies to hire advisers who are independent of the Federal Housing Finance Agency (FHFA).
Fairholme said the companies believe that they don't have to follow basic rules of corporate governance unless specifically directed to do so by the FHFA.
Fairholme had a 2.24 percent stake in Fannie and a 2.98 percent stake in Freddie as of December 31, according to Thomson Reuters data.
(Reporting by Tanya Agrawal in Bangalore; Editing by Kirti Pandey)