It is true. You cannot take and close the account unless a distributable event occurs.
These are
Leaving employement.. (there may be a wait period after this, but it is usually immediate)
Attainment of retirement age (as defined by the plan, not always 59 1/2, and the plan does not have to allow withdrawals at this time.)
Or Permanent disability.
If any of these have occurred you can close.. if not you can't.
This is a common misconception that you can just close anytime and pay the tax and penalty. NOT so... once the funds are deposited into a retirment account they cannot be easily accessed.
Hardships and loans are the only options while still employed, and again these do not have to be allowed, and can be restricted to number of loans, and reason for loan... It is the employers plan and they choose the options.
It would be nice if when they encouraged employees to sign up for these plans, they educated them on the regulations that go along with them....

I want to withdrawl from my 401 k and pay off my house. I no longer work at the company that holds my 401K is this possible? I am 53 years old...

Not sure how much cash you are looking to get out of this, but why don't you use the cash you have in your savings to pay off the original loan in your account, and then draw a new loan off of it. I believe you can take up to half of your 401(k) amount with a loan. If you were to cash out your 401(k) you would lose up to half of it in ealry withdrawl and tax penalities. Just a thought :)