if you inherited the property you are the owner. However, you also have to take the step of titling the property in your name. whether this will cause issues with the mortgage company is something you should take up with a lawyer in the state the property is located in. Maybe you can refi and substantially less than 12.5%
I agree with the bank. here's something from 1098 instructions
Payments by Third Party (you)
Report all interest received on the mortgage as received
from the borrower, except as explained under Seller
Payments, later. For example, if the borrower's mother
makes payments on the mortgage, the interest received
from the mother is reportable on Form 1098 as received
from the borrower.
