Citigroup (C) saves the most money when doing short sales among the largest mortgage servicers in the country, according to Barclays Capital research.

The bank conducts a short sale on 40% of its resolutions of troubled loans, the third highest percentage. Bank of America (BAC) and JPMorgan Chase (JPM) each resolve roughly half of their problem mortgages through short sale.

Because of the extended time it now takes a foreclosure to be completed and the maintenance and litigation costs involved, short sales reduce loss severities by as much as 10% from severely delinquent subprime loans, according to the report.

"The additional benefit is due to high liquidation costs and a distressed discount, as an REO property may be stripped or more poorly maintained," BarCap analysts said.

Investors complain of widespread fraud, which if prevented by the banks could raise savings even more.

Still, short sale growth boomed since the foreclosure crisis struck. Short sales on all types of loans increased to 46% of liquidiations as of the end of last year, according to BarCap, up from 29% in 2008.