Is flood escrow required for a loan to an LLC to construct a personal residence? The exemption in 12 CFR 339.5(a)(2) reads:

§ 339.5 Escrow requirement.
(a) In general--(1) Applicability. Except as provided in paragraphs (a)(2) or (c) of this section, an FDIC-supervised institution, or a servicer acting on its behalf, shall require the escrow of all premiums and fees for any flood insurance required under § 339.3(a) for any designated loan secured by residential improved real estate or a mobile home that is made, increased, extended, or renewed on or after January 1, 2016, payable with the same frequency as payments on the designated loan are required to be made for the duration of the loan.

(2) Exceptions. Paragraph (a)(1) of this section does not apply if:
(i) The loan is an extension of credit primarily for business, commercial, or agricultural purposes;

This does not state that the exception applies if the extension of credit is made to a business or non-natural person; it only references purpose.

You say the loan is to an LLC but you also say it is for a personal residence.
1) An LLC is an entity that doesn't dwell anywhere.
2) The flood rules state they line up with Reg Z when they use the phrase "credit primarily for business, commercial, or agricultural purposes." IOW, if it's not subject to Reg Z, it's not subject to the escrow requirements.

Is your loan to an LLC? If so, it is exempt from Reg Z and exempt from escrow requirements.

Thank you, David! Yes, the loan is to an LLC.

As to the business purpose exemption for escrowing flood insurance premiums, if we have a loan to an individual to purchase an investment property (SFR or apartment building to be rented out), would that also be exempt from the escrow requirement for flood?