"late" payment reporting

Pennsylvania - My mortgage is due the 1st of every month. Late charges are not assessed until after the 17th. My payment coupons state "On-time payment - due on or before....." and "Late payment - pay on or after.....". I recently tried to refinance with another institution, only to be informed that my credit report only showed that TWO payments within the last TWO YEARS were not late. I've verified that I am not behind on any payments, and I have all bank-marked stubs to prove it. My current mortgage holder (local bank) states that unless the payment for the month in advance is paid on or before the 1st (May due in April, June due in May, etc.) they are reporting it as late to the credit bureaus. IS THIS LEGAL? Other places on the internet say they can't legally report a payment as late until AFTER 30 days from the stated due date. Again, IS THIS LEGAL? Thanks in advance.

Anything after the payment date and cure period if any can be reported as late.

You could ask them to remove the reports or threaten to sue if you feel they had agreed the payments were not late.