I was reading up on Ginnie Mae in Wikipedia. It explained that if the home buyer defaults and the foreclosed property doesn't cover the remainder of the mortgage, the government picks up the difference making the investor (who owns the mortgage or rather a derivative security tied to it) whole. Then it says:
The arrangement seemingly benefits everyone involved:
* The mortgage lender has offloaded all risk to the GNMA, and has very quickly received a reimbursement of the money lent to home buyers from the bond dealer, and can immediately use this money to offer another pool of loans to the public.
* The home-buying public benefits from lower mortgage rates caused by the large amount of lender competition, in turn caused by a large supply of lenders, which is enabled by this quick reimbursement of money.
* The lower-income home-buying public benefits from a greater willingness by lenders to risk making loans to that group.
* The investors, whose money makes all of this work in the first place, benefit from the "full faith and credit" of the United States government; GNMA bonds are backed by the pool of mortgages, and even if massive defaults were to occur, the U.S. government would make good on all payments. GNMA bonds also feature higher returns than other U.S. government issued bonds.
Maybe the encyclopediast didn't think the taxpayers were "involved"...
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