Since July, shares of Fannie Mae (NASDAQOTH:FNMA) and Freddie Mac (NASDAQOTH:FMCC) have lost nearly a third of their value.

Source: Wikipedia.

Has anything changed fundamentally? Do activist investors feel less confident now about the legal battles eventually being resolved in their favor? And most importantly, are shares a great deal now, or still a likely trap for investors seeking a quick payday?

The Fannie and Freddie saga
The short version of the drama is that investors want the opportunity to see some returns from their shares now that Fannie and Freddie are both profitable again.

During the second quarter alone, the two companies combined for more than $5 billion in profits. And the previous quarter was even better thanks to all the settlements the big banks agreed to pay. In fact, Fannie Mae and Freddie Mac have paid back $130.5 billion and $88.2 billion to the Treasury, respectively, which combines for over $30 billion more than they received in the bailout.

Unfortunately, the payments to the Treasury are counted as "dividends," so the principal balance received in the bailouts stays the same.

Investors have two main reasons to complain here: the government unilaterally changed the arrangement regarding the handling of the agencies' profits, and there is a real chance that the agencies could be eliminated entirely, and none of the bills released so far have been especially shareholder-friendly.

Some "big fish" are fighting the current arrangement
Pershing Square Capital Management, the hedge fund firm headed by Bill Ackman, has filed a lawsuit against the government, essentially saying that the Treasury diverting 100% of the profits to itself illegally deprives shareholders of the opportunity to profit from their investments.

Carl Icahn also purchased a $50 million stake in the agencies, which is actually a relatively small investment by his standards. Icahn likely views the investment as a speculative potential home-run, but he's not throwing his weight around like he has with some other investments of his.

To my mind, it is really hard to argue against the shareholders' position. For starters, if the government intended to keep all of the profits for itself, why did it allow shares of Fannie and Freddie to continue to trade? And, now that the Treasury has been paid back and then some, shouldn't investors who took a chance see some reward?

Recent developments in the proposed winding-down of Fannie and Freddie
There have been several proposed bills intending to wind down Fannie and Freddie. The good news is that they seem to have gotten more shareholder-friendly over the past couple of years. However, the bad news is that the chances of a positive outcome for shareholders still seem quite small.

For example, one proposal, the Partnership to Strengthen Homeownership Act, would allow Fannie and Freddie to be sold and recapitalized as new entities, but it's unclear what that means to shareholders. The language in the bill's summary states that Fannie and Freddie "will repay the government with interest for the government's investment in the institutions. The repayment must take into account both the injection of capital and the overall exposure to the government."

Well, if you look at it from a dollars standpoint, that's already happened. And, if you look at it from the standpoint of the current arrangement, the principal amount owed to the government will never be paid back. So, how much is enough? And what does that leave for shareholders?

If you buy in, know that you aren't an investor
Ackman has estimated that even after the dilutive effects of the Treasury's stake, both companies could be worth between $23-$47 a share.

While I personally think those figures are a little optimistic even if all goes perfectly for shareholders, there is no question that there is money to be made if and only if some sort of profit-sharing arrangement is either agreed upon or forced by the courts. And forgive me, but I'm not willing to risk a significant amount of my portfolio on a bet that the government will do something.

That's just what this is: a bet. It's certainly a more attractive bet now that the share price has dropped, but that doesn't change the fact that you're buying a lottery ticket -- the potential payout is just a little higher in the lottery (and, granted, the odds may be worse).

If you do buy in, do so knowing that you're gambling, not investing. And if you do, I wish you the best, but even if the price drops another 50%, I'll still be sitting this one out.

Matthew Frankel has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.