You don't pay interest on interest ever. Unpaid interest and principal balance are kept in two separate buckets and interest is only calculated on the principal.
The only way you'd ever end up paying interest on interest (on a fixed home loan loan) would be if you and the lender both agreed to rewrite the loan. In which case any unpaid interest from the original loan would be combined with remaining loan balance to form the basis of the new loan.
That said, I have seen cases where the borrower fell a single month behind, and remained a month behind, and ended up making payments for more than a year without a single penny going toward principal.
Yeah... no interest on interest... there's that nasty bong charge called a late fee which is worse.
Late fees certainly don't help a person get back up when they've been knocked down but I don't know that they are worse. I worked for Sally Mae for a brief period of time in their call center, servicing student loans. I got to see first hand, loans that had nearly double in size, because they would offer (and borrowers were dumb enough to accept) forbearance on any past due loans... Not just a single "one time get out of jail free card" but over and over again. Some loans had as many as nine forbearances in their history (IIRC 9 is the max that a loan can legally have).