My HML stopped approving construction draws (A frozen BRRRR!)

[Caleb Bryant]

Hello fellow BPers. I've found myself in a bit of a predicament.

Two months ago marks the closing date of my first attempt at a BRRRR. After many showings and a handful of offers, I was more than excited to hear that my offer on a duplex-turned-SFR had been accepted at $15,000 under asking and $10,000 under market value as later appraised. The plan was simple - The house was originally built as a duplex before being converted to a single-family home, so all it would take was a kitchen install, some framing, and a good bit of cosmetic work to convert it back into a duplex and add upwards of $50,000 to its market value.

Now, the deal on financing was that I'd bring $16,000 to the table, and my HML would cover the rest of the purchase price along with a $35,000 escrow for construction costs all at a 12% interest rate along with 3 points up front - Yikes! I know. The first bump in the road came the day before closing, when I learned from the title company that my cash-to-close would actually come out to $21,000. Thanks for the heads up HML! Fortunately, I had enough capital to cover the difference, but this almost entirely wiped out my cash reserves dedicated to this project. Thanks to my contractor, construction has gone smoothly up to this point, and we're about 3 weeks of work from being able to rent both sides out and move on to the refi and some serious cash-flow. Unfortunately, we're now running into a much more serious obstacle. I've been informed that my bank is struggling to process draw requests and other essential operations, as well as that they have lost a 250m line of credit. In the words of my contact at the bank, 'we're f****d.' Three weeks ago, my contact started giving me the run around on construction draws. Fast forward today, the bank is barely responsive and I have not been able to process a draw since then. Construction has halted and my contractor has been forced to move to another project for the time being.

To put some icing on the cake, the bank is still demanding I pay interest on the full amount of the loan including the construction escrow. 

I'm curious to hear your thoughts on this BPers, and I hope nobody is in a similar situation, but if you are, how are you managing?