A couple stories today show regulators engaging in the absolutely shameful tactic of looking backward and not forward when it comes to the systemic fraud in the mortgage market, in the mistaken belief that crimes perpetrated in the past should be punished. I don’t know where they got this idea.

First off, the Treasury Department posted an increase in suspicious activity reports (SARs) for the second quarter, based on mortgage fraud from originators during the bubble years.

The Financial Crimes Enforcement Network (FinCEN) today reported in its Second Quarter 2011 Analysis of mortgage loan fraud suspicious activity reports (MLF SARs) that financial institutions filed 29,558 MLF SARs in the second quarter of 2011 up from 15,727 MLF SARs reported in the same quarter of 2010.

A large majority of the MLF SARs examined in the second quarter involved mortgages closed during the height of the real estate bubble. The upward spike in second quarter MLF SAR numbers is directly attributable to mortgage repurchase demands and special filings generated by several institutions. For instance, FinCEN noted that 81 percent of the MLF SARs filed during the quarter involved suspicious activities that occurred before 2008; 63 percent involved suspicious activities that occurred four or more years ago.

“We’re continuing to see a large number of SARs filed on activity that occurred more than two years ago, an indication that financial institutions are uncovering fraud as they sift through defaulted mortgages,” said FinCEN Director James H. Freis, Jr.

These SARs come from the financial institutions, under obligations to record. We knew about the prevalence of mortgage fraud as far back as 2004, when the FBI announced a spike. We know that mortgage brokers engaged in all kinds of schemes, including using white-out to fake the terms of a loan or an income statement, or putting the real loan on a stack of dummy papers, and ripping off the fake terms after the borrowers signed everything. These have been well-documented, yet not really well-prosecuted.

Next, the SEC has been investigating financial institutions over mortgage loans.

The Securities and Exchange Commission is investigating Royal Bank of Scotland, Credit Suisse and other financial institutions for their handling of problem mortgage loans, according to public disclosures and people familiar with the matter.

The SEC is examining whether banks misled shareholders about the number of loans they might be forced to buy back because of early defaults – known as loan repurchase requests – and set aside sufficient reserves to fund those purchases or handle related litigation, people familiar with the matter said.

This is mainly a case about misrepresentations to investors, and doesn’t have much to do with the core crisis. But it shows the level of denial among the big banks about their liability. They committed acts of fraud and think they can get away with them.

What remains to be seen is if anything will come of these investigations and reports by the regulators. The banks don’t believe they will skate for no reason.