Why is my old HELOC now considered as "Cash out" if I want to refi and consolidate my 1st and 2nd. Does not make sense.

Was the HELOC taken out at the time of purchase or subsequently?

If you didnt take the 2nd mortgage at time of purchase but got it later and pulled "cash out", that's why Fannie Mae, Freddie Mac consider it cash out.FHA considers it cash out if you havent used it in the last 12 months.