Our customer found checks drawn on another bank, forged the endorsement and deposited them into the BAnk account here, then closed the account here one week later.
Today I received notice of Domestic Collections of a claim for breach of warranty.
Obviously I have pursued reaching out to the closed account owner to attempt to collect funds.
Any suggestions? Bank obligations would be greatly appreciated.
Thanks in advance!!

This falls under UCC 4-208. http://www.law.cornell.edu/ucc/4/4-208
Frankly, I find article 4 to be complex, and I'd be on the phone to an attorney to discuss defenses against the claim.

A terrific resource for those looking for a basic understanding of the UCC Article 3 and 4 rules on checks should take a look at The Check Book; A Guide for Check Disputes, by Gene Elerding. Gene has given us permission to offer The Check Book free of charge in our Banker Tools section. You can find it at http://www.bankersonline.com/tools/training/ucc3_4trng_ge.html.

{The rest of this response is revised.]

The depositary bank warrants to the paying bank that it has the right to enforce the check and that all the signatures (other than the drawer's) are authorized and genuine. That puts the depositary bank on the hook for a forged endorsement, and a claim for breach of warranty in most states is valid for up to three years (it's a shorter period in Georgia and Florida and perhaps elsewhere).

As the depositary bank, you have to decide whether to honor the paying bank's claim (which should at least be supported by an affidavit from the payee) or to contest it. If you contest it, you'll possibly be defending the claim in court.

I read the question as a forged endorsement only, not a forged maker signature.The depository bank is likely responsible for the forged endorsements for possibly up to 3 years, depending on the state.If I misunderstood, I apologize.