HUD withdraws plan to reform closing costs.

Byline: Mary Umberger

Nearly two years after saying it would streamline the bewildering process of closing a real estate deal, the federal government Monday withdrew a proposal that it said could have led to substantial savings for home buyers.

The Department of Housing and Urban Development had said the new rules would save consumers an average of $700 per closing.

But because of the "significant number of questions raised" about the revisions, HUD Acting Secretary Alphonso Jackson said the agency would withdraw the proposed closing rules from public review.

The housing industry widely expected that the new proposals would have required up-front, flat-fee pricing on appraisals, title insurance, termite inspections and other services. The current standards require a "good-faith estimate" followed by specific pricing that usually is not known until just before the closing.

Consumer advocates have long complained that, depending on the type of loan and the relationships between the lenders and service…