I would specify that the 2 x12 be plated with plywood. The knots in the 2 x12 will shrink and fall out. The holes will become an entry point for mice. This is a cheap fix during construction
The wall sheathing comes down over the 2x12 if its plywood great but celotex will cover as well and then you have your siding at least how its done in my neck of woods
Tom
