We have a customer who is claiming a forged endorsement, within the specified time frame. I am sending to him, the Affidavit to forward on to the payee. After I get this back, how do I handle the claim? Do I send a notice to the other bank and request the money back? Do I need special forms?

I apologize for asking what is probably a simple question, but this is the first one I have had....

Yes, the next step after receiving the signed affidavit is to send the check (along with a copy of the affidavit) directly to the depository bank as a 'without entry' claim. There is no uniform form for doing this, but your letter should make it clear that you are pursuing a breach of warranty claim.

Thanks JacFSB; one more question...the "without entry" claim, is this just wording in the letter that I send? I want to make sure I do this right as to not cause anyone additional work.

A without entry claim is a return sent directly to the depository bank by mail, courier, pigeon, etc., instead of through the Fed system. It is not necessary to include the words 'without entry' in your letter, but I have found it helpful to note it in the address if i don't have a specific contact name or department to send the return to. For example, I may address the letter to:
Last National Bank
ATTN: Without Entry Claim
address, etc.

Got it. Thanks again for the guidance!