We study secured lending contracts using a proprietary, loan-level database of bilateral repurchase agreements containing groups of simultaneous loans backed by multiple tranches within a securitization. We show that lower-quality loans (i.e., loans backed by lower-rated collateral) have higher margins and spreads. We calibrate a model using collateral asset prices and find that lower-quality loans are riskier despite the higher margins, yet cheaper for the borrower. This finding is consistent with a combination of lender optimism and reaching for yield. We also show that lowerquality loans have longer maturity, consistent with models of rollover concerns with asymmetric information.LOANS SECURED BY COLLATERAL CONTRIBUTE to the financing of critical assets such as real estate and the balance sheets of financial intermediaries. The 2007 financial crisis put a spotlight on nonprice loan terms such as collateral requirements and maturity, as lenders' active adjustment of these terms to reduce their credit exposure contributed to the fragility of our financial system. Recent literature has proposed dynamic models of lending in which borrowers hold illiquid assets and face rollover risk. In these models, lender and borrower beliefs can differ, and lenders' actions reinforce one another, leading to runs and maturity "rat races." 1 However, despite these theoretical advances, the question of how fragility arises from lenders' use of nonprice terms remains * Jun Kyung Auh is at Yonsei Univsersity. Mattia Landoni is at the Federal Reserve Bank of Boston. We are indebted to Stefan Nagel (Editor) and two anonymous referees, as well as Patrick

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