If a loan is made for commercial (business) purpose and the borrower's principal residence is used for collateral, if government monitoring information required?

What is the purpose?

Business expenses.

No because it is not a HMDA reportable purpose. But, a flood determination is needed.

In the event the loan was refinanced, it would be HMDA reportable and if the borrower is a natural person GMI would need to be collected.

On this website under "Bankers Tools", there is a Checklist for Commercial Purpose R/E Loan and one of the checklist items is Government Monitoring Sheet (if residential). Is the checklist incorrect?

No that is not incorrect. If the loan is secured by residential property and the purpose of the loan meets the definition of a home purchase, home improvement or refinancing as defined by HMDA the GMI is required. If th loan purpose does not meet one of those definitions then the GMI is not applicable.

That check list appears to be designed to be answered yes, no or n/a for the particular items listed to be in the file.