I know there are ways to set the distance grass vanishes. But what seems logical to me is a way to hide grass at your feet. Because I often can't find something on the ground even when I'm standing on it, and that realistically shouldn't happen. It would also improve performance a little bit.

Is there a setting or a mod that does this?

Oblivion.ini :

bDrawShaderGrass=0

There's a spell mod called DZ Hide Grass. You cast it, and the grass clears for 60 seconds.

You can find it here:
http://www.tesnexus.com/downloads/file.php?id=18341