1) The role of credit rating agencies… They overrated a big bulk of the securitized assets and created the illusion of high return and low risks. This created an appetite in the market for such assets leading to a rush of wall street money to the mrotgage industry thus pushing up the prices to unsustainable levels (lax lending, 100% financing with bad credit rating, speculation, individuals holding multiple mortgages with 0% stake hoping to make a quick buck and willing to walk away when the s**t hit the fan as they had no stake).
2) The secondary and more serious role played by esoteric financial instruments and sidebets (e.g. credit default swaps). These opaque instruments involved trillions of dollars in sidebets and exacerbated the situation (what should have been a sub-prime mortgage crisis turned into a full blown financial crisis with Insurance companies such as AIG and banks needing help and capital infusion to prevent a total disaster).
3) While I believe that securitization is a good thing as enables more opportunities for potential homeowners to get better financing (through broader competition). However, the point you make in the article regarding virtuality is important; the removal of the incentives for the banks to properly vet the borrowers coupled with wall street’s resident idiot savants’ design of assets with little understanding of risk (one that is unlikely to change any time soon) makes a strong case for your argument.