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Special Report

America's Foreclosure Crisis

This is a rush transcript from "Special Report," January 13, 2011. This copy may not be in its final form and may be updated.

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DOLLY LENZ, PRUDENTIAL DOUGLAS ELLIMAN: Oh, I believe we will see more foreclosures and I think personally 2011 will be the greatest foreclosure year and will surpass 2010. Even though that seems almost impossible, I believe it will surpass 2010.

RICK SHARGA, REALTY-TRAC VICE PRESIDENT: There’s an overhang of 700,000 bank properties that are not yet on the market.

GERRI WILLIS, FOX BUSINESS NETWORK ANCHOR: Consider that the unsold market right now is over four million. That’s way more than an entire year's worth of inventory out there. So we've got a lot to go before this housing crisis gets better.

(END VIDEO CLIP)

BRET BAIER, HOST OF "SPECIAL REPORT": Foreclosures -- staggering, almost 2.9 million in 2010.  That is up two percent from 2009, up 23 percent from 2008. And as you heard there, 2011 promises unfortunately to be a bigger year for foreclosures. What about this and the economy? We're back with the panel.  Jonah, what does this tell us about what’s ahead?

JONAH GOLDBERG, EDITOR-AT-LARGE, NATIONAL REVIEW ONLINE: It tells us 2011 will be a very rough year, because the only way you get through this is if you get the unemployment rate down, and one of the ways you get the unemployment rate down is get the housing industry back. There is a real nasty catch-22 to it.

And at the end of the day, it seems the only way to get through this is you just have to purge out bad properties, the bad mortgages and all of the rest. One of the reasons why next year’s going to be worse than this, worse in 2010 is because of the freeze in all of the foreclosures that we had because of the robo-calling scandal and all the rest. They're going to be pushed to 2011. We just have to get the poison out of the system.

BAIER: Juan, banks are holding a lot of properties, and they're not even all on the market yet.

JUAN WILLIAMS, FOX NEWS CONTRIBUTOR: Some of it is still in legal tangle because the courts have to make a decision on what’s legally held and what’s not legally held. But Jonah is right. You have to clear out distressed inventory and move forward.

The trick here is as you move forward to have consumers and the banks find some semblance of balance. If the banks believe in the consumer's ability to pay and set reasonable terms for mortgages and for equity loans and that the consumers have the capacity to pay. The people that I hold so guilty in all of this, the rating agencies, actually perform their function.

BAIER: So the calls that we saw before the election, largely we predicted tide to the election for foreclosures to continue to be frozen and for the effort to stop foreclosures, they'll come to an end?

WILLIAMS: No. That has stopped. You know, that was a response by the way from the administration to conservative calls to say this is un -- there is no excuse for this kind of interference in the market and it will slow our economic recovery.

BAIER: Charles?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: Look, it is an ironic and sad fact that the lower the prices go, the sooner they hit bottom and the sooner the market will clear, the sooner they'll be able to rebuild.

The administration out of a humane impulse had project called HAMP to help those who were going to lose their houses but unfortunately it's not been successful. The projections in midyear were that three out of every four people who were on this HAMP assistance would end up losing to the house anyway.         And it's a way of slowing down the market. I think the boil has to be lanced. It’s going to happen in 2011 and I think it will allow a recovery afterwards. But if you are losing the house and the family’s going to suffer, no consolation economically it's necessary.

BAIER: Especially because so many Americans put their value, their wealth into their home.

GOLDBERG: No. The psychological role of housing is enormous, and there’s an argument that housing is still overvalued. To get to politics of this, it does tee up very nicely for the Republicans a series of important hearing on reforming Fannie Mae and Freddie Mac which are essentially insolvent if it weren't for the $150 bailout and they have $5 trillion of mortgages on their books. Their common shares of stock dropped 99 percent in value, and that was a direct result of policies, at least I would argue that came over the last few years led by Democrats. That argument needs to be had and hasn't happened in a proper way yet.

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