I try, when possible, to link to useful explanatory documents in the financial crisis. And this IMF two-pager on the basics of securitization is pretty clear. It doesn't do a very good job getting into the problems with the practice, but it's a very clear explanation of the mechanisms beneath it. In particular, watch how each step in the securitization process takes the holder of the security farther and farther from any actual knowledge about the underlying assets. They have formulas, and flawed information from the ratings agencies, but all they've actually got is a piece of a part of a tranche derived from an abstraction of the original holding. They have no concept of the reality underlying their investment. It's all trust that the analysis and repackaging conducted before their purchase was accurate.

This graphic tells the basic story well, except that in real life, the process repeats many times, and there's often little to no direct contact left with the originator.