We are making a construction permanent (C-P) loan where the home will be located in a Special Flood Hazard Zone. Are we required to escrow for flood insurance during the construction phase?

Answer: Because the overall term of the C-P loan is greater than 12 months, you are required to escrow for flood insurance. The fact that the construction phase is 12 months or less is irrelevant. This means that you must require flood insurance at consummation.