When you are that close (and for the sake of argument, I’ll assume the only thing left to do is the siding), the construction loan bank will usually give you an extension on the loan term. They don’t want the house – they just want to be paid off. I am in MN and we often run into trouble late in the year due to weather (tough to do things outside when it is snowing and 5 degrees….but I digress). Typically the bank will give the borrower an extention on the loan until the weather breaks (which may be April….damn, digressing again). I have never had a construction loan go to the next phase – foreclosure. The bank can accelerate the loan and make it due immediately. Your friend will be in default if they do this and the foreclosure process may begin.

If her current lender is not going to give her and extention she should contact another bank and see if they can do a "construction-to-permanent" loan, or give her another few months to finish the home.
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I am a mortgage broker and a realtor