Here's an obscure law that mortgage lenders would probably rather you didn't know about: Georgia statute 44-14-3.

The reason is, it can cost mortgage lenders $500 or more if they didn't properly finish the paperwork for a homeowner who paid off his or her loan.

The law has been on the books for decades, but because of a recent amendment, more folks are likely to be hearing about it as they pay off their mortgages, refinance or sell their homes.

That's good news for Michael Watkins, president of Traditional Title Co., a Sandy Springs firm that provides property record searches used whenever real estate backed loans are made.

Under Georgia law, lenders are required to notify the county clerk within 60 days after a mortgage is paid off. But about a third of the time, they don't, estimates Watkins, which means his company's employees often see deed records that falsely indicate that a property has more than one loan outstanding.

"It causes us to do a lot more work that we wouldn't have to do if [lenders] did their job," Watkins said. "It's the sort of thing where the mortgage company has received the money and they're not interested in clearing up the record."

Such cancellation notices are important, said Atlanta attorney Jennifer Fitzgerald, because mortgage lenders in Georgia file what is known as a security deed when they loan money to property buyers. The security deed effectively gives them the right to take ownership of the property if the borrower defaults on the loan.

If it isn't canceled after the loan is paid off, it remains "a mar on your title," said Fitzgerald. "This is not something you need to be paranoid about," she said, but it can delay the refinancing of a loan or cause other problems.

That's where homeowners come in.

As the result of an amendment enacted in May, lenders are now required to notify homeowners who pay off their mortgage that they can collect $500 if their lender doesn't send the proper paperwork to clear up their property title within 60 days. The amendment, to forestall class-action lawsuits against lenders, also requires the homeowner to make that demand in writing after waiting at least 60 days.

Georgia law has long allowed homeowners and other real estate owners to demand $500 in damages from lenders who didn't meet the deadline, but most people didn't know about the law, said Fitzgerald. She's been doing her bit to change that. She says she has filed "several hundred" lawsuits on the behalf of homeowners in recent years. (Lenders who fail to comply with the law are also liable for homeowners' legal expenses.)

Fitzgerald said lenders' recent performance seems to have improved: About 20 percent still fail to file the proper paperwork.

Joe Brannen, president of the Georgia Bankers Association, said the trade group sought the amendment to remove the threat of several class-action lawsuits, agreeing to the extra notification as "part of the negotiation."

He said problems with unfinished paperwork probably grew as many new mortgage lenders jumped into the market in recent years, but added that he would be "stunned" if such problems affected as many as a third of paid-off mortgages.

In any case, with the new language in place, "they won't miss it now," he said.

That's what Esther Smith figures too. "I wasn't aware of the law," said the retired federal employee, who lives in southwest Atlanta. But Smith said she quickly collected $500 last year after Fitzgerald contacted her and challenged a credit union on her behalf for not completing the paperwork on a paid-off home equity loan.

The new notification requirement is "good, but nobody's going to get the $500," she said. "I think they're going to be very careful."