What is the recommended procedure when the Employer fails to deduct loan payments from the participants' paychecks and doesn't discover the omission until the allowable grace period has elapsed?

I really haven't a clue, but only a guess.
Sounds like:
Failure to follow terms of loan policy (therefore failure to follow terms of the document)
effected only 1 person
happened within two years
Sounds like it could be corrected under APRSC.
Problem is, what is the correction? If it is individual accounts, then it might be reasonable to simply start taking loan payments now. maybe calculate interest up to this point and time and have company pay them since it sounds like it was their error. (Though why didn't participant question why no loan payments were taken?)
If the $ are pooled, then I think you have a bigger problem since the interest is technically effecting everyone.
again, that is only my guess, I think it less likely to be a problem self correcting if ee is an NHCE as well.

I don't recall anything in EPCRS (which covers APRSC and other correction procedures) that provides any help under section 72. While you may be able to fix the situation from the perspective of getting the loan back on track and possible plan disqualification because of the error, you may not be able to fix the deemed distribution and premature taxation of the participant. You may find some way to make it up to the participant outside of the plan.