"When sub-prime borrowers began to default in droves and the value of the private label MBS tumbled, investors also pulled away from the conventional MBS market as well, even though these borrowers continued to make their payments. However, with a short period the domino effect of defaulting mortgagors spread and then began the recession."
I've always viewed the housing crash as the result of the bottom falling out of the housing market. I don't know how common it is now, but in the early 2000s, it was very common for people to view homeownership as some sort of magic escalator to riches - one would buy a home, then basically be guaranteed to resell it for significantly more later, and the gains would be used to buy a more expensive home.
I went to a free "how to buy your first home" presentation around 2002, and this was exactly the model recommended by the people giving the presentation - people who worked in the home loan and real-estate field. Basically "buy the most expensive house you can possibly afford now, because you'll be making more money in a few years and what you think is an expensive monthly payment now will seem like nothing. Then you can resell your home and buy something even fancier."
Obviously, this depends upon a constant influx at the bottom of the "escalator", which is unsustainable because it's a pyramid scheme. The collapse of that pyramid is exactly what happened, IMO, and it wouldn't have been possible without the sub-prime lending.