If I remember correctly, that happens because when on calorific deficit, by default people reduce their activity - this is the instinctual response. Body responds by losing muscular mass as energetically it is costlier to maintain than fat. This is why it is important to maintain or even increase the activity while losing weight.

This would surprise me since the primary reason a body stores excess fat is to be used for energy when needed. Then, the moment of need arrives and the body burns mostly muscle? Citation would be appreciated.

I always think of it as the difference between starving in a cave waiting for winter to end and starving while attempting to hunt down food in the summer. In the winter, reducing energy expenditure is important so you lose muscle first. In the summer it's more important to maintain condition so you can fight off competition and cultivate food sources.

By hunkering down on the couch and just losing weight you get the winter scenario. By exercising while you lose weight you get the summer scenario.

Makes sense really. The fat stores will go a longer way with less muscle. I imagine that would work brilliantly during the cold winter months living in a cave, where theres less reason to move much. Unfortunately, this is dysfunctional in the developed world.