How long can a DDA account have a debit block? A loan is in default and the loan officer does not want the customer to use the funds but he does not want to apply the funds to the account

You should either proceed with the process offset against the account if provided for in your agreement with the customer or remove the hold. As far as I know, Reg CC has no provisions for holding money just in case you decide you want to take it.

I agree. It does not appear that you have a legitimate reason to "hold" those funds.