The grace period is a set number of days after the initial asset due date, during which the borrower can make their payment without incurring a penalty (a "penalty bonus" for the investor).
It is intended to cover possible payment delays caused by:
Bank-to-bank payment processing
National holidays
Specific policies of the loan originator
Minor lateness by the borrower
The length of the grace period varies for each asset. You can always review the specific grace period for an asset on its details page.