REDWOOD
MORTGAGE INVESTORS VIII


(A
California Limited Partnership)


Index
to Form 10-K





December
31, 2007








Part IPage
      No.Item
      1   – Business
            4Item
      1a – Risk Factors
            9Item
      2   – Properties
            9Item
      3   – Legal Proceedings
            10Item
      4   – Submission of Matters to a Vote of Security Holders
      (Partners)
            10Part IIItem
      5   – Market for the Registrant’s “Limited Partnership
      Units” and Related Unitholder Partnership Matters
            10Item
      6   – Selected Consolidated Financial Data
            11Item
      7   – Management Discussion and Analysis of Financial
      Condition and Results of Operations
            13Item
      7a – Quantitative and Qualitative Disclosures About Market
      Risk
            22Item
      8   – Consolidated Financial Statements and Supplementary
      Data
            26Item
      9   – Changes in and Disagreements with Accountants on
      Accounting and Financial Disclosure
            60Item
      9a – Controls and Procedures
            60Item
      9b – Other Information
            60Part IIIItem
      10 – Directors, Executive Officers and Corporate
Governance
            60Item
      11 – Executive Compensation
            62Item
      12 – Security Ownership of Certain Beneficial Owners and Management, and
      Related Stockholder Matters
            63Item
      13 – Certain Relationships and Related Transactions, and Director
      Independence
            63Item
      14 – Principal Accountant Fees & Services
            63Part IVItem
      15 – Exhibits, Financial Statements and Schedules
            64Signatures
            65Certifications
            67








1








UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC 20549








FORM
10-K








(Mark
One)


[X]
            ANNUAL REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE


SECURITIES
EXCHANGE ACT OF 1934





For
the Year Ended December 31, 2007





OR





[   ]
            TRANSITION REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE


SECURITIES
EXCHANGE ACT OF 1934





For
the transition period from ______________ to ______________








Commission
File Number:  000-27816








REDWOOD
MORTGAGE INVESTORS VIII,


a
California Limited Partnership


(Exact
name of registrant as specified in its charter)








California
            94-3158788(State
      or other jurisdiction of incorporation or organization)
            (I.R.S.
      Employer Identification)








900
      Veterans Blvd., Suite 500, Redwood City, CA
            94063(address
      of principal executive offices)
            (zip
      code)








(650)
      365-5341


(Registrant’s
telephone number, including area code)








Securities
      registered pursuant to Section 12 (b) of the Act:
            NONE





Securities
      registered pursuant to Section 12 (g) of the Act:
            Limited
      Partnership Units





2





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act of 1933, as amended.





Yes
            
            
            No
            XX





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Securities Act of 1934, as
amended.





Yes
            
            
            No
            XX





Indicate
by check mark whether the registrant (1) has filed all reports to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.





Yes
            XX
            
            No





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act.





Large
      Accelerated Filer
            
            Accelerated
      Filer
            
            Non-Accelerated
      Filer
            X





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).





Yes
            
            
            No
            XX





As of
June 30, 2007, the aggregate value of limited partnership units held by
non-affiliates was $290,240,000.  This calculation is based on the
capital account balance of the limited partners and excludes partnership units
held by the general partner.





Documents
incorporated by reference:





Portions
of the Prospectus effective August 4, 2005, and post effective Amendment No. 7
dated March 6, 2008, containing supplement No. 5 dated March 6, 2008, (the
“Prospectus”), are incorporated in Parts II, III, and IV.  Exhibits
filed as part of Form S-11 Registration Statement #333-125629 are incorporated
by reference in part IV.





3


Part I








Item 1 –
Business





Overview





Redwood
Mortgage Investors VIII, a California Limited Partnership (the “Partnership”),
was organized in 1993.  Michael R. Burwell, Gymno Corporation and
Redwood Mortgage Corp., both California Corporations, are the general
partners.  The partnership is organized to engage in business as a
mortgage lender, for the primary purpose of making loans secured primarily by
first and second deeds of trust on California real estate.  Loans are
arranged and serviced by Redwood Mortgage Corp.  The partnership’s
objectives are to make loans that will: (i) yield a high rate of return from
mortgage lending; and (ii) preserve and protect the partnership’s
capital.  Investors should not expect the partnership to provide tax
benefits of the type commonly associated with limited partnership tax shelter
investments.  The partnership is intended to serve as an investment
alternative for investors seeking current income.  However, unlike
other investments, which are intended to provide current income, an investment
in the partnership will be less liquid, not readily transferable, and not
provide a guaranteed return over its investment life.





Initially,
the partnership offered a minimum of $250,000 and a maximum of $15,000,000 in
units, of which $14,932,000 were sold.  This initial offering closed
on October 31, 1996.  Subsequently, the partnership commenced a second
offering of up to $30,000,000 in units commencing on December 4,
1996.  This offering sold $29,993,000 in units and was closed on
August 30, 2000.  On August 31, 2000 the partnership commenced its
third offering for another 30,000,000 units ($30,000,000).  This
offering sold $29,999,000 in units and was closed on April 23,
2002.  On October 30, 2002 the partnership commenced its fourth
offering for an additional 50,000,000 units ($50,000,000).  This
offering sold $49,985,000 in units and was closed on October 6,
2003.  On October 7, 2003 the partnership commenced its fifth offering
of 75,000,000 units ($75,000,000).  This offering sold $74,904,000 in
units and was closed on August 3, 2005.  On August 4, 2005 the
partnership commenced its sixth and current offering of 100,000,000 units
($100,000,000).  As of December 31, 2007, $79,607,000 in units have
been sold in this sixth offering, bringing the aggregate sale of units to
$279,420,000.  Units in the sixth offering are being offered on a
“best efforts” basis, which means no one is guaranteeing any minimum number of
units will be sold, through broker-dealer member firms of the Financial Industry
Regulatory Authority (FINRA).





4


The
partnership began selling units in February 1993, and began investing in
mortgages in April 1993.  At December 31, 2007, the partnership has
investments in secured loans with principal balances totaling
$305,568,000.  Interest rates range from 7.00% to
13.00%.  Currently, First Trust Deeds comprise 45.48% of the total
amount of the secured loan portfolio, a decrease of 2.42% from the 2006 level of
47.90%.  Junior loans (2nd and 3rd Trust Deeds) make up 54.52%, an
increase of 2.42% from the 2006 level of 52.10%.  Loans secured by
single family properties (1-4 units) comprise 62.70% of the secured loan
portfolio.  Loans secured by multi-family properties make up 3.07% of
the total secured loans.  Commercial loans comprise 33.03% of the
secured portfolio, an increase of 12.63% from the 2006 level of 20.40% and land
makes up 1.20% of the secured loan portfolio.  Of the total secured
loans, 61.48% are in the nine counties of the San Francisco Bay Area, 16.71% are
in counties adjacent to the San Francisco Bay Area, and 21.81% are in other
counties located in California.  Average loan size increased this
year, and is now averaging $2,634,000 per loan, up $147,000 from the average
loan balance of $2,487,000 in 2006.  During 2007, the partnership’s
loan portfolio continued to grow.  As of December 31, 2007 the secured
loan portfolio balance was $305,568,000 compared to $261,097,000 as of December
31, 2006; an increase of $44,471,000 (17.03%).  The number of loans
also increased to 116 as of December 31, 2007 from the 105 loans existing at
December 31, 2006; an increase of 11 loans (10.48%).  These increases
are due to the ability of the partnership, by virtue of its increasing capital,
to invest in more loans.  The average loan as of December 31, 2007,
represents 0.85% of partner capital and 0.86% of outstanding secured loans,
compared to December 31, 2006 when average loan size represented 0.92% of
partners’ capital and 0.95% of outstanding secured loans.  Some of the
loans are fractionalized between affiliated partnerships with objectives similar
to those of the partnership to further reduce risk.  Over the last
several years diversification fractionalization with other lenders has
decreased.  As of December 31, 2007 and 2006 fractionalized loans
represented 5.17% and 9.25% of the portfolio, respectively.  Average
equity per loan transaction at the time the loans were made based upon
appraisals and prior liens at such time, which is the loan plus any senior
loans, divided by the property’s appraised value, subtracted from 100%, stood at
32.74%, a decrease in equity of 1.34% from the 2006 level.  This
average equity is considered conservative.  Generally, the greater the
equity, the greater the protection for the lender.  The general
partners believe the partnership’s loan portfolio is in good condition with five
properties with filed notices of default as of the end of December
2007.  The principal balance of these properties with filed notices of
default represents 1.69% ($5,169,000) of the secured loan
portfolio.  The partnership does expect that during 2008 additional
foreclosures may need to be filed in order to collect payment from borrowers who
have become delinquent.  This is typical of our loan market segment
and the partnership expects to have a level of delinquency higher than banking
institutions within its portfolio.





Delinquencies
are discussed under Item 7 – Management’s Discussion and Analysis of Financial
Condition and Results of Operations.





For a
discussion of the properties owned by the partnership, see Item 2,
Properties.





The
partnership’s net income continued to take an upward trend.  Net
income increased from $15,368,000 in 2005 to $18,872,000 in 2006 and to
$21,572,000 in 2007.  This was made possible largely through
investment of additional capital derived from sales of partnership
units.  The secured loan portfolio increased from $214,012,000 in 2005
to $261,097,000 in 2006 and to $305,568,000 in 2007, an increase of 42.78% over
the two-year period.  The partnership has placed its loans at interest
rates competitive in the marketplace.  Mortgage interest income
increased from $19,203,000 in 2005 to $26,395,000 in 2006 and to $28,502,000 in
2007, an increase of 48% over the two-year period.  During 2007 the
partnership’s annualized yield on compounding accounts was 7.09% and 6.87% on
monthly distributing accounts.








Competition
and General Economic Conditions.





The
partnership’s major competitors in providing mortgage loans are banks, savings
and loan associations, thrifts, conduit lenders, mortgage brokers, and other
entities both larger and smaller than the partnership.  Many of these
lenders are not portfolio lenders and rely upon their ability to sell notes they
have funded in order to provide further capital resources to continue their
lending operations.  In addition, many competitors, due to their size,
are unable to regularly entertain loan requests at or above $1,000,000, thus
reducing the competition and allowing the partnership to provide higher quality
loans and/or higher returns.





5


From 2004
through 2006, competition for real estate loans was strong, particularly among
residential lenders.  Partly due to competitive factors, underwriting
standards decreased and innovative loan products developed.  As a
result, many borrowers who previously had a difficult time obtaining real estate
financing were able to obtain real estate loans.  In 2007, real estate
purchase volumes continued to decline from their highs in
2005.  Accompanying lower purchase volumes, loan demand decreased,
values began to decline and loan delinquencies began to
increase.  Together, these factors, as well as others, contributed to
a reduced demand for mortgage backed securities.  Lenders reliant upon
the sale of their notes to provide additional capital for lending faced a credit
squeeze, pressure on capital, and earnings.  During 2007, over 250
lenders ceased to do business in the United States, resulting in diminished
competition in the lending industry.  The general partners believe the
lower level of competition may provide an opportunity for the partnership to
seek well-qualified borrowers with desirable security for its lending
operations.  It is possible that coupon rates may rise as competition
lessens, and as interest rate spreads increase a clearer risk return equation
may develop.





During
2007, the national economy itself has decelerated.  Real Gross
Domestic Product, the output of goods and services produced by labor and
property located in the United States increased at an annual rate of 0.6% in the
fourth quarter of 2007 as compared to 2.1% in the fourth quarter of
2006.  For the first through fourth quarters of 2007, Real Gross
Domestic Product was 0.6%, 3.8%, 4.9% and 0.6% as compared to 4.8%, 2.4%, 1.1%
and 2.1% for the first through fourth quarters of 2006.  The Federal
Reserve is not forecasting a recession but does anticipate slow growth for this
year and higher unemployment.





The
unemployment rate for the United States increased in the fourth quarter of 2007
to 5.0% as compared to 4.7% for the third quarter, 4.7% for the second quarter
and 4.5% for the first quarter.  In January and February of 2008, the
national unemployment rate fell to 4.9% and 4.8%, respectively. On a comparison
basis, the annual unemployment rates for the United States were 4.6% for 2007,
4.6% for 2006, 5.1% for 2005 and 5.5% for 2004.  In California,
unemployment rates increased 1% year over year from 4.9% in December 2006 to
5.9% as of December 2007.  Unemployment is a significant indicator of
a borrower’s ability to make payments.





Month to
month, inflation has been volatile throughout 2006 and 2007.  The cost
of oil, a component in inflation, has fluctuated but followed a significant
upward trend rising to $110 per barrel in March of 2008.  The Consumer
Price Index for All Urban Consumers decreased in December of 2007 by 0.1% before
seasonal adjustment, but was up by 4.1% for the year.  Consumer Price
Index increases were 2.5% for 2006, 3.4% for 2005 and 1.9% for
2004.  At the same time, interest rates have been declining as the
Federal Reserve has exhibited strong resolve in attempting to stimulate the
economy through a variety of means, including lowering the Federal Funds
Rate.  After having left the Federal Funds Rate unchanged at 5.25% for
more than two years, in September 2007 the Federal Reserve acted to decrease the
Federal Funds Rate by 0.50%, then again by 0.25% in October 2007, 0.25% in
December 2007, 1.25% in January 2008, and 0.75% in March 2008 to a level of
2.25%.  Long term interest rates, represented by the 10 year treasury
bonds, have responded somewhat to the lowered Federal Funds
Rates.  However, as long term rates are not directly related to the
Federal Funds Rate, it is likely to take some time before the lowering of the
Federal Funds Rate will have its full effect.  As of September 30,
2007, the 10 year Treasury yield was 4.61%, at December 31, 2007 it was 4.04%,
and at March 22, 2008 it was 3.34%.  The lowering of the Federal Funds
Rate has also had an effect of lowering interest rates on longer term
maturities.  These lower interest rates help the affordability of
owning real estate.





Mortgage
rates have responded slowly to the Federal Reserves actions to lower interest
rates.  Freddie Mac reports average interest rates for 30 year fixed
rate conforming loans were 6.16% for March of 2007, 6.66% for June of 2007,
6.38% for September of 2007, 6.10% for December of 2007 and 5.87% on March 20,
2008.  Historically, the annual average rate for 30 year fixed rate
conforming mortgages has been 6.34% in 2007, 6.41% in 2006, 5.87% in 2005, and
5.83% in 2004.  The recent downward trend in interest rates on real
estate loans should begin to stimulate real estate sales volumes which have been
declining since their high point in 2005.





On a
national level, both residential sales volumes and median home prices dropped in
2007.  Sales of existing homes as reported by the National Association
of Realtors declined from 7,076,000 in 2005 to 6,478,000 in 2006 and to
5,652,000 in 2007.  The median national sales price of existing homes
was $219,000 in 2005.  It increased to $221,900 in 2006 and then
declined to $219,000 in 2007.





6


The
partnership is expecting a reduced number of lenders in the marketplace along
with strengthened underwriting standards throughout the
industry.  Each of these factors is expected to lead to increased
lending opportunities.  Nevertheless, in many of our lending areas,
residential real estate values have been declining, which will require the
partnership to be diligent in determining appropriate loan to value
parameters.  In addition, the slowing economy will create less demand
and perhaps further increases in unemployment which might make it more difficult
for borrowers to meet their monetary obligations.  Lowered interest
rates and the Federal Reserve’s efforts to further stimulate the economy could
mitigate these factors and have positive effects on the partnership and
borrowers’ abilities to meet their financial obligations.





Secured
Loan Portfolio.





A summary
of the partnership’s secured loan portfolio as of December 31, 2007, is set
forth below (in thousands):




Loans
      as a Percentage of Appraised ValuesFirst
      Trust Deeds
            
            $
            138,965Appraised
      Value of Properties at Time of Loan
            
            
            248,987Total
      Investment as a % of Appraisal
            
            
            48.76
            %First
      Trust Deed Loans
            
            
            138,965Second
      Trust Deed Loans
            
            
            166,103Third
      Trust Deed Loans
            
            
            500Total
      of Trust Deed Loans
            
            
            305,568Priority
      Positions due Other Lenders:First
      Trust Deed Loans due Other Lenders
            
            
            433,508Second
      Trust Deed Loans due Other Lenders
            
            
            289Total
      Debt
            
            $
            739,365Appraised
      Property Value at Time of Loan
            
            
            1,098,743Total
      Debt as a % of Appraisal based on appraisedvalues
      and prior liens at date loan was consummated
            
            
            67.29
            %Number
      of Secured Loans Outstanding
            
            
            116Average
      Secured Loan
            
            $
            2,634Average
      Secured Loan as a % of Secured Loans Outstanding
            
            
            0.86
            %Largest
      Secured Loan Outstanding
            
            
            34,383Largest
      Secured Loan as a % of Secured Loans Outstanding
            
            
            11.25
            %Largest
      Secured Loan as a % of Partnership Assets
            
            
            9.95
            %Secured
      Loans as a Percentage of Total Secured Loans
            
            PercentFirst
      Trust Deed Loans
            
            
            45.48
            %Second
      Trust Deed Loans
            
            
            54.36
            %Third
      Trust Deed Loans
            
            
            0.16
            %Total
      Trust Deed Loan Percentage
            
            
            100.00
            %





Type
      of Secured Loans by Property
            
            Amount
            
            
            PercentSingle
      Family (1-4 units)
            
            $
            191,608
            
            
            
            62.70
            %Apartments
            
            
            9,369
            
            
            
            3.07
            %Commercial
            
            
            100,933
            
            
            
            33.03
            %Land
            
            
            3,658
            
            
            
            1.20
            %Total
            
            $
            305,568
            
            
            
            100.00
            %





7


The
following is a distribution of secured loans outstanding as of December 31, 2007
by California Counties (in thousands):





TotalCalifornia
      County
            
            Secured
      Loans
            
            
            PercentSan
      Francisco Bay Area CountiesSan
      Francisco
            
            $
            72,203
            
            
            
            23.63
            %Alameda
            
            
            41,962
            
            
            
            13.74
            %Contra
      Costa
            
            
            39,185
            
            
            
            12.82
            %Santa
      Clara
            
            
            11,497
            
            
            
            3.76
            %San
      Mateo
            
            
            10,506
            
            
            
            3.44
            %Napa
            
            
            4,681
            
            
            
            1.53
            %Sonoma
            
            
            4,600
            
            
            
            1.51
            %Solano
            
            
            1,990
            
            
            
            0.65
            %Marin
            
            
            1,210
            
            
            
            0.40
            %187,834
            
            
            
            61.48
            %San
      Francisco Bay Area Adjacent CountiesSacramento
            
            
            44,162
            
            
            
            14.45
            %San
      Joaquin
            
            
            6,267
            
            
            
            2.05
            %Stanislaus
            
            
            654
            
            
            
            0.21
            %51,083
            
            
            
            16.71
            %Other
      California CountiesLos
      Angeles
            
            
            41,215
            
            
            
            13.49
            %San
      Diego
            
            
            7,675
            
            
            
            2.51
            %Riverside
            
            
            5,246
            
            
            
            1.72
            %Fresno
            
            
            4,496
            
            
            
            1.47
            %Amador
            
            
            1,857
            
            
            
            0.61
            %Placer
            
            
            1,332
            
            
            
            0.44
            %Sutter
            
            
            889
            
            
            
            0.29
            %El
      Dorado
            
            
            816
            
            
            
            0.27
            %Butte
            
            
            747
            
            
            
            0.24
            %All
      others
            
            
            2,378
            
            
            
            0.77
            %66,651
            
            
            
            21.81
            %Total
            
            $
            305,568
            
            
            
            100.00
            %





Number
      of Secured Loans in Foreclosure
            5
            
            $5,169,000





Scheduled
maturity dates of secured loans as of December 31, 2007 are as follows (in
thousands):




Prior
      to December 31, 2008
            
            $
            186,715Between
      January 1, 2009 and December 31, 2009
            
            
            61,384Between
      January 1, 2010 and December 31, 2010
            
            
            36,713Between
      January 1, 2011 and December 31, 2011
            
            
            6,935Between
      January 1, 2012 and December 31, 2012
            
            
            12,049Thereafter
            
            
            1,772$
            305,568





The
scheduled maturities for 2008 include seven loans totaling $35,472,000, and
representing 11.61% of the secured loan portfolio, past maturity at December 31,
2007.  The partnership occasionally allows borrowers to continue to
make the payments on debt past maturity for periods of time.  Of these
past maturity loans, the partnership has begun foreclosure on one with a
principal balance totaling $4,072,000.  The partnership’s largest loan
totaling $34,383,000 represents 11.25% of outstanding secured loans and 9.95% of
partnership assets.  It is the Partnership’s experience that loans can
be refinanced or repaid before and after the maturity
date.  Therefore, the table of scheduled maturities is not a forecast
of future cash receipts.





8


Item 1a – Risk
Factors





A
description of the risk factors with respect to investing in the limited
partnership units publicly offered by the partnership is set forth in the
partnership’s prospectus, dated August 4, 2005, beginning on page 8, under the
section “Risk Factors”, which is incorporated herein by reference.





Item 2 -
Properties





During
2002, a single-family residence that secured a partnership loan totaling
$4,402,000, including accrued interest and advances, was transferred via a
statutory warranty deed to a new entity named Russian Hill Property Company, LLC
(“Russian”).  Russian was formed by the partnership to complete the
development and sale of the property.  The assets, liabilities and
development or sales expenses of Russian have been consolidated into the
accompanying consolidated financial statements of the
partnership.  Costs related to the sale and development of this
property was capitalized during 2003.  Commencing January 2004, costs
related to sales and maintenance of the property were expensed.  At
December 31, 2007 and 2006 the partnership’s total investment in Russian was
$3,979,000, net of a valuation allowance of $500,000.





In
September 2004, the partnership acquired a single family residence through a
foreclosure sale.  At the time the partnership took ownership of the
property, the partnership’s investment totaled $1,937,000 including accrued
interest and advances.  The borrower had begun a substantial
renovation of the property, which was not completed at the time of
foreclosure.  The partnership has decided to pursue development of the
property by processing plans for the creation of two condominium units on the
property.  These plans will incorporate the majority of the existing
improvements currently located on the property.  At December 31, 2007
and 2006 the partnership’s total investment in this property was $1,857,000 and
$1,759,000, respectively, net of a valuation allowance of $500,000.





In
December 2004, the partnership acquired land through a deed in lieu of
foreclosure.  At the time the partnership took ownership of the
property, the partnership’s investment totaled $4,377,000 including accrued
interest and advances.  At December 31, 2007 and 2006, the
partnership’s investment in this property was $3,639,000.  During
2006, management established a $490,000 reserve against this property to reduce
the carrying amount to management’s estimate of the ultimate net realizable
value of the property.  During the third quarter of 2006, the
partnership sold one of the three parcels at a loss of approximately $73,000,
which had been previously reserved for.  At December 31, 2007, the
partnership’s total investment in this property was $3,222,000, net of a
valuation allowance of $417,000.





During
2005, the partnership acquired a multi-unit property through
foreclosure.  At the time the partnership took ownership of the
property, the partnership’s investment, together with three other affiliate
partnerships, totaled $10,595,000, including accrued interest and
advances.  Upon acquisition, the property was transferred via a
statutory warranty deed to a new entity named Larkin Street Property Company,
LLC (“Larkin”).  The partnership owns a 72.50% interest in the
property and the other three affiliates collectively own the remaining
27.50%.  No valuation allowance has been established against this
property as management is of the opinion the property will have adequate equity
to allow the partnership and its affiliates to recover their
investments.  The assets and liabilities of Larkin have been
consolidated into the accompanying consolidated financial statements of the
partnership.  The partnership and the affiliates have continued making
improvements in anticipation of listing the property for sale in late
2008.  As of December 31, 2007, approximately $1,708,000 in costs
related to the development of this property have been
capitalized.  The partnership pursued its effort to recover funds from
the guarantors of the original loan and during the third quarter of 2006,
obtained a pro-rate share of $431,000, representing the partnership’s pro rata
share of the recovery, from one of them.  These proceeds were applied
to reduce the partnership’s investment and as of December 31, 2007 the
partnership’s investment, together with the other affiliated partnerships,
totaled $11,872,000.





During
2006, the partnership acquired a single-family residence through
foreclosure.  At the time the partnership took ownership of the
property, the partnership’s investment totaled $6,028,000.  As of June
30, 2007 and December 31, 2006, approximately $253,000 and $111,000,
respectively, in costs related to the development of this property had been
capitalized.  In June 2007, the property was sold at a loss of
$602,000, which was offset against a valuation allowance of $919,000, which was
allocated for this property.





9


In
February 2007, the partnership acquired a single-family residence through
foreclosure.  At the time the partnership took ownership of the
property, the partnership’s investment totaled $2,640,000 including accrued
interest, late charges, advances and the balance owed to the senior lien holder,
including accrued charges.  In September, 2007 the senior lien holder
was paid in full.  A single asset entity named Borrette Property
Company, LLC (“Borrette”) holds title to the property.  The
partnership beneficially owns 100% of the membership interests in
Borrette.  During 2007, the partnership received $207,000 from a title
insurance claim, which was accepted without prejudice.  As of December
31, 2007, the partnership has spent approximately $39,000 (net of the insurance
claim) for property improvements in anticipation of listing the property for
sale.  As of December 31, 2007, the partnership’s total investment in
Borrette was $2,679,000.





Item 3 – Legal
Proceedings





In the
normal course of business, the partnership may become involved in various types
of legal proceedings such as assignment of rents, bankruptcy proceedings,
appointment of receivers, unlawful detainers, judicial foreclosure, etc., to
enforce the provisions of the deeds of trust, collect the debt owed under the
promissory notes, or to protect, or recoup its investment from the real property
secured by the deeds of trust.  None of these actions would typically
be of any material importance.  As of the date hereof, the partnership
is not involved in any legal proceedings other than those that would be
considered part of the normal course of business.





Item 4 – Submission of
Matters to Vote of Security Holders (Partners)





No
matters have been submitted to a vote of the partnership.








Part II





Item 5 – Market for the
Registrant’s “Limited Partnership Units” and Related Unitholder Partnership
Matters





100,000,000
units at $1 each (minimum purchase of 2,000 units) are currently being offered
($200,000,000 in units were previously offered and sold through separate
offerings) through broker-dealer member firms of the Financial Industry
Regulatory Agency (FINRA) on a “best efforts” basis (as indicated in Part I item
1).  Investors have the option of withdrawing earnings on a monthly,
quarterly, or annual basis or compounding the earnings.  Limited
partners may withdraw from the partnership in accordance with the terms of the
limited partnership agreement subject to possible early withdrawal
penalties.  There is no established public trading
market.  As of December 31, 2007, 7,392 limited partners had a capital
balance of $311,065,000, net of Formation Loans and syndication
costs.





A
description of the partnership units, transfer restrictions and withdrawal
provisions is more fully described under the section of the prospectus entitled
“Description of Units” and “Summary of Limited Partnership Agreement”, pages 81
through 84 of the prospectus, a part of the referenced registration statement,
which is incorporated herein by reference.





During
the year 2007, the partnership’s annualized yield on compounding accounts was
7.09% and 6.87% on monthly distributing accounts.  During the year
2006, the partnership’s annualized yield on compounding accounts was 7.13% and
6.90% on monthly distributing accounts.  For yields for prior years,
please see the table in Item 6.





10


Item 6 – Selected
Consolidated Financial Data





Redwood
Mortgage Investors VIII began operations in April 1993.





Consolidated
financial condition and results of operation for the partnership as of and for
the five years ended December 31, 2007 were (in thousands, except for net income
per $1,000 invested by limited partners for entire period):





Consolidated Balance
Sheets





ASSETS





December
      31,





2007
            
            
            
            2006
            
            
            
            2005
            
            
            
            2004
            
            
            
            2003Cash
      and cash equivalents
            
            $
            11,591
            
            
            $
            18,096
            
            
            $
            28,853
            
            
            $
            16,301
            
            
            $
            8,921LoansLoans,
      secured by deeds of trust
            
            
            305,568
            
            
            
            261,097
            
            
            
            214,012
            
            
            
            171,745
            
            
            
            147,174Loans,
      unsecured
            
            
            345
            
            
            
            —
            
            
            
            —
            
            
            
            34
            
            
            
            34Accrued
      interest and late fees
            
            
            5,600
            
            
            
            3,384
            
            
            
            3,254
            
            
            
            4,895
            
            
            
            4,735Advances
      on loans
            
            
            2,358
            
            
            
            96
            
            
            
            103
            
            
            
            131
            
            
            
            416Less
      allowance for loan losses
            
            
            (4,469
            )
            
            
            (2,786
            )
            
            
            (3,138
            )
            
            
            (2,343
            )
            
            
            (2,649
            )Due
      from affiliate
            
            
            764
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Real
      estate owned, net
            
            
            23,609
            
            
            
            25,231
            
            
            
            21,328
            
            
            
            9,793
            
            
            
            3,979Other
      assets
            
            
            117
            
            
            
            104
            
            
            
            72
            
            
            
            62
            
            
            
            44$
            345,483
            
            
            $
            305,222
            
            
            $
            264,484
            
            
            $
            200,618
            
            
            $
            162,654








LIABILITIES AND PARTNERS’
CAPITAL





December
      31,





2007
            
            
            
            2006
            
            
            
            2005
            
            
            
            2004
            
            
            
            2003LiabilitiesLine
      of credit
            
            $
            29,450
            
            
            $
            30,700
            
            
            $
            32,000
            
            
            $
            16,000
            
            
            $
            22,000Accounts
      payable
            
            
            62
            
            
            
            76
            
            
            
            10
            
            
            
            25
            
            
            
            224Payable
      to affiliate
            
            
            557
            
            
            
            481
            
            
            
            489
            
            
            
            638
            
            
            
            448Deferred
      revenue
            
            
            355
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Minority
      interest
            
            
            3,240
            
            
            
            3,017
            
            
            
            3,042
            
            
            
            —
            
            
            
            —Subscriptions
      to partnership inapplicant
      status
            
            
            492
            
            
            
            557
            
            
            
            776
            
            
            
            424
            
            
            
            1,21034,156
            
            
            
            34,831
            
            
            
            36,317
            
            
            
            17,087
            
            
            
            23,882Partners’
      capitalLimited
      partners subject toredemption
            
            
            311,065
            
            
            
            270,160
            
            
            
            227,970
            
            
            
            183,368
            
            
            
            138,649General
      partners subject toredemption
            
            
            262
            
            
            
            231
            
            
            
            197
            
            
            
            163
            
            
            
            123Total
      partners’ capital
            
            
            311,327
            
            
            
            270,391
            
            
            
            228,167
            
            
            
            183,531
            
            
            
            138,772$
            345,483
            
            
            $
            305,222
            
            
            $
            264,484
            
            
            $
            200,618
            
            
            $
            162,654





11





Consolidated Statements of
Income





For
      the Years Ended December 31,





2007
            
            
            
            2006
            
            
            
            2005
            
            
            
            2004
            
            
            
            2003Gross
      revenue
            
            $
            29,617
            
            
            $
            27,325
            
            
            $
            20,188
            
            
            $
            17,133
            
            
            $
            12,958Expenses
            
            
            8,017
            
            
            
            8,432
            
            
            
            4,779
            
            
            
            4,981
            
            
            
            3,369Income
      before interest credited topartners
      in applicant status
            
            
            21,600
            
            
            
            18,893
            
            
            
            15,409
            
            
            
            12,152
            
            
            
            9,589Interest
      credited to partners inapplicant
      status
            
            
            28
            
            
            
            21
            
            
            
            41
            
            
            
            20
            
            
            
            37Minority
      interest share of subsidiary loss
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            42Net
      income
            
            $
            21,572
            
            
            $
            18,872
            
            
            $
            15,368
            
            
            $
            12,132
            
            
            $
            9,594Net
      income to general partners (1%)
            
            
            216
            
            
            
            188
            
            
            
            154
            
            
            
            121
            
            
            
            96Net
      income to limited partners (99%)
            
            
            21,356
            
            
            
            18,684
            
            
            
            15,214
            
            
            
            12,011
            
            
            
            9,498Total
      net income
            
            $
            21,572
            
            
            $
            18,872
            
            
            $
            15,368
            
            
            $
            12,132
            
            
            $
            9,594Net
      income per $1,000 invested bylimited
      partners for entire period(annualized)-
      where income is compounded andretained
            
            $
            71
            
            
            $
            71
            
            
            $
            70
            
            
            $
            72
            
            
            $
            78-
      where partner receives income inmonthly
      distributions
            
            $
            69
            
            
            $
            69
            
            
            $
            68
            
            
            $
            70
            
            
            $
            75





Annualized
yields when income is compounded or distributed monthly for the years 2003
through 2007 are outlined in the table below:





Compounded
            
            
            Distributed2003
            
            
            7.76
            %
            
            
            7.50
            %2004
            
            
            7.22
            %
            
            
            6.99
            %2005
            
            
            7.05
            %
            
            
            6.83
            %2006
            
            
            7.13
            %
            
            
            6.90
            %2007
            
            
            7.09
            %
            
            
            6.87
            %





The
average annualized yield, when income is compounded and retained, from
inception, for the years ended December 31, 2005-2007, was 8.12%, 8.00% and
7.95%, respectively.  The average annualized yield, when income is
distributed monthly, from inception, for the years ended December 31, 2005-2007
was 7.87%, 7.72% and 7.66%, respectively.





Certain
reclassifications, not affecting previously reported net income or total partner
capital, have been made to the previously issued consolidated financial
statements to conform to the current year presentation.








12


Item 7 – Management
Discussion and Analysis of Financial Condition and Results of
Operations





MANAGEMENT
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OF THE
      PARTNERSHIP





Critical
Accounting Policies.





In
preparing the consolidated financial statements, management is required to make
estimates based on the information available that affect the reported amounts of
assets and liabilities as of the consolidated balance sheet dates and income and
expenses during the reported periods.  Such estimates relate
principally to the determination of (1) the allowance for loan losses (i.e. the
amount of allowance established against loans receivable as an estimate of
potential loan losses) including the accrued interest and advances that are
estimated to be unrecoverable based on estimates of amounts to be collected plus
estimates of the value of the property as collateral and (2) the valuation of
real estate owned through foreclosure.  At December 31, 2007, the
partnership owned six real estate properties, which were taken back from
defaulted borrowers.





Loans and
the related accrued interest, late fees and advances are analyzed on a periodic
basis for recoverability.  Delinquencies are identified and followed
as part of the loan system.  Delinquencies are determined based upon
contractual terms.  A provision is made for loan losses to adjust the
allowance for loan losses to an amount considered by management to be adequate,
with due consideration to collateral values, to provide for unrecoverable loans
and receivables, including impaired loans, other loans, accrued interest, late
fees and advances on loans and other accounts receivable
(unsecured).  The partnership charges off uncollectible loans and
related receivables directly to the allowance account once it is determined that
the full amount is not collectible.





If the
probable ultimate recovery of the carrying amount of a loan, with due
consideration for the fair value of collateral, is less than amounts due
according to the contractual terms of the loan agreement and the shortfall in
the amounts due are not insignificant, the carrying amount of the investment
shall be reduced to the present value of future cash flows discounted at the
loan’s effective interest rate.  If a loan is collateral dependent, it
is valued at the estimated fair value of the related collateral.





If events
and/or changes in circumstances cause management to have serious doubts about
the collectibility of the contractual payments, a loan may be categorized as
impaired and interest is no longer accrued.  Any subsequent payments
on impaired loans are applied to reduce the outstanding loan balances, including
accrued interest and advances.  As of December 31, 2007 there were no
impaired loans.





Real
estate acquired through foreclosure is stated at the lower of the recorded
investment in the loan, plus any senior indebtedness, or at the property’s
estimated fair value, less estimated costs to sell.  The partnership
periodically compares the carrying value of real estate to expected undiscounted
future cash flows for the purpose of assessing the recoverability of the
recorded amounts.  If the carrying value exceeds future undiscounted
cash flows, the assets are reduced to estimated fair value.





Recent
trends in the economy have been taken into consideration in the aforementioned
process of arriving at the allowance for loan losses and real estate
owned.  Actual results could vary from the aforementioned provisions
for losses.





13


Forward-Looking
Statements.





Certain
statements in this Report on Form 10-K which are not historical facts may be
considered forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities and
Exchange Act of 1934, as amended, including statements regarding the Company’s
expectations, hopes, intentions, beliefs and strategies regarding the
future.  Forward-looking statements include statements regarding
future interest rates and economic conditions and their effect on the
partnership and its assets, trends in the California real estate market,
estimates as to the allowance for loan losses, estimates of future limited
partner withdrawals, the total amount of the Formation Loan, 2008 annualized
yield estimates, additional foreclosures in 2008, expectations regarding the
partnership’s level of delinquency, plans to develop certain properties, beliefs
relating to the impact on the partnership from current conditions and trends in
the “sub prime” lending markets, beliefs regarding the partnership recovering
the full value of its investment in certain properties, the expectation that
borrower foreclosures will not have a material effect on liquidity, the use of
excess cash flow and the intention not to sell the partnership’s loan
portfolio.  Actual results may be materially different from what is
projected by such forward-looking statements.  Factors that might
cause such a difference include unexpected changes in economic conditions and
interest rates, the impact of competition and competitive pricing and downturns
in the real estate markets in which the Company has made loans.  All
forward-looking statements and reasons why results may differ included in this
Form 10-K are made as of the date hereof, and we assume no obligation to update
any such forward-looking statement or reason why actual results may
differ.





Related
Parties.





The
general partners of the partnership are Redwood Mortgage Corp., Gymno
Corporation and Michael R. Burwell.  Most partnership business is
conducted through Redwood Mortgage Corp., which arranges, services and maintains
the loan portfolio for the benefit of the partnership.  The fees
received by the general partners are paid pursuant to the partnership agreement
and are determined at the sole discretion of the general partners, subject to
limitations imposed by the partnership agreement. In the past the general
partners have elected not to take the maximum compensation.  The
following is a list of various partnership activities for which related parties
are compensated.





·
            Mortgage
      Brokerage CommissionsFor fees in
      connection with the review, selection, evaluation, negotiation and
      extension of loans, the general partners may collect an amount equivalent
      to 12% of the loaned amount until 6 months after the termination date of
      the offering.  Thereafter, the loan brokerage commissions
      (points) will be limited to an amount not to exceed 4% of the total
      partnership assets per year.  The loan brokerage commissions are
      paid by the borrowers, and thus, are not an expense of the
      partnership.  In 2007, 2006 and 2005, loan brokerage commissions
      paid by the borrowers were $2,932,000, $3,496,000, and $3,697,000,
      respectively.





·
            Mortgage
      Servicing Fees  Monthly mortgage servicing fees of up to
      1/8 of 1% (1.5% on an annual basis) of the unpaid principal of the
      partnership’s loans are paid to Redwood Mortgage Corp., or such lesser
      amount as is reasonable and customary in the geographic area where the
      property securing the mortgage is located.  Once a loan is
      categorized as impaired, mortgage servicing fees are no longer accrued
      thereon.  Additional servicing fees are recorded upon the
      receipt of any subsequent payments on impaired loans.  Mortgage
      servicing fees of $1,449,000, $2,479,000 and $1,736,000 were incurred for
      the years ended December 31, 2007, 2006 and 2005,
      respectively.  For the years 2006 and 2005, these servicing fees
      were charged at 1%, on an annual basis, of the outstanding principal
      balances and for 2007, the rate charged was less than 1%.  If
      the maximum mortgage servicing fee of 1.5%, on an annual basis, had been
      charged to the partnership, then net income would have been reduced by
      approximately $2,709,000, $1,240,000 and $868,000 in 2007, 2006 and 2005,
      respectively.  Reducing net income reduces the annualized
      yields.  An increase or decrease in this fee within the limits
      set by the partnership’s agreement directly impacts the yield to the
      limited partners.





·
            Asset
      Management FeesThe general
      partners receive monthly fees for managing the partnership’s portfolio and
      operations up to 1/32 of 1% of the ‘net asset value’ (3/8 of 1% on an
      annual basis).  Management fees to the general partners of
      $1,143,000, $991,000 and $814,000 were incurred by the partnership for
      years 2007, 2006 and 2005,
respectively.


14





·
            Other
      Fees  The partnership agreement provides that the general
      partners may receive other fees such as reconveyance, mortgage assumption
      and mortgage extension fees.  Such fees are incurred by the
      borrowers and are paid to the general
partners.





·
            Income and
      LossesAll income and
      losses are credited or charged to partners in relation to their respective
      partnership interests.  The allocation to the general partners
      (combined) shall not exceed 1%.





·
            Operating
      ExpensesThe general
      partners may be reimbursed by the partnership for all operating expenses
      actually incurred by it on behalf of the partnership, including without
      limitation, out-of-pocket general and administration expenses of the
      partnership, accounting and audit fees, legal fees and expenses, postage
      and preparation of reports to limited
partners.





·
            Contributed
      CapitalThe general
      partners jointly or severally are required to contribute 1/10 of 1% in
      cash contributions as proceeds from the offerings are received from the
      limited partners.  As of December 31, 2007 and 2006, a general
      partner, Gymno Corporation, had contributed $280,000 and $249,000,
      respectively, as capital in accordance with Section 4.02(a) of the
      partnership agreement.





·
            Sales
      Commission – “Formation Loan” to Redwood Mortgage
      Corp.Sales commissions relating to the capital
      contributions by limited partners are not paid directly by the partnership
      out of the offering proceeds.  Instead, the partnership loans to
      Redwood Mortgage Corp., a general partner, amounts necessary to pay all
      sales commissions and amounts payable in connection with unsolicited
      sales.  The loan is referred to as the “Formation
      Loan”.  It is unsecured and non-interest bearing and is applied
      to reduce limited partners capital in the consolidated balance
      sheets.  The sales commissions range between 0 (for units sold
      by the general partners) and 9%.  It is estimated that the total
      amount of the Formation Loan will approximate 7.6% based on the assumption
      that 65% of the investors will reinvest earnings, which qualify for the
      higher commission percentage.  Formation Loans made to Redwood
      Mortgage Corp. were on a per offering
basis.





The
following table summarizes Formation Loan transactions through December 31, 2007
(in thousands):





Offering





1st
            
            
            2nd
            
            
            3rd
            
            
            4th
            
            
            5th
            
            
            6th
            
            
            TotalLimited
      partnercontributions
            
            $
            14,932
            
            
            $
            29,993
            
            
            $
            29,999
            
            
            $
            49,985
            
            
            $
            74,904
            
            
            $
            79,607
            
            
            $
            279,420Formation
      Loans made
            
            
            1,075
            
            
            
            2,272
            
            
            
            2,218
            
            
            
            3,777
            
            
            
            5,661
            
            
            
            6,006
            
            
            
            21,009Repayments
      to date
            
            
            (991
            )
            
            
            (1,586
            )
            
            
            (1,122
            )
            
            
            (1,538
            )
            
            
            (1,385
            )
            
            
            (441
            )
            
            
            (7,063
            )Early
      withdrawalpenalties
      applied
            
            
            (84
            )
            
            
            (142
            )
            
            
            (107
            )
            
            
            (50
            )
            
            
            (66
            )
            
            
            —
            
            
            
            (449
            )Balance,December
      31, 2007
            
            $
            —
            
            
            $
            544
            
            
            $
            989
            
            
            $
            2,189
            
            
            $
            4,210
            
            
            $
            5,565
            
            
            $
            13,497





The
amount of the annual installments paid by Redwood Mortgage Corp. are determined
at annual installments of one-tenth of the principal balance of the Formation
Loan at December 31 of each year until the offering period is
closed.  Thereafter, the remaining Formation Loan is paid in ten equal
amortizing payments over a period of ten years.  Interest has been
imputed at the market rate of interest in effect at the date the offering
closed. See footnote 1 to the consolidated financial statements.





On
December 31, 2007, the partnership was engaged in its sixth offering of
$100,000,000 in units).  Contributed capital equaled $14,932,000 for
the first offering, $29,993,000 for the second offering, $29,999,000 for the
third offering, $49,985,000 for the fourth offering, $74,904,000 for the fifth
offering and $79,607,000 for the sixth offering, totaling an aggregate of
$279,420,000 as of December 31, 2007.  Of this amount, $492,000
remained in applicant status.





15


Results of Operations – For
the years ended December 31, 2007, 2006 and 2005





Changes
in the partnership’s operating results for the years ended December 31, 2007,
2006 and 2005 are discussed below ($ in thousands):





Changes
      for the years ended December 31,2007
            
            
            2006Dollars
            
            
            Percent
            
            
            Dollars
            
            
            PercentRevenueInterest
      on loans
            
            $
            2,107
            
            
            
            7.98
            %
            
            $
            7,192
            
            
            
            37.45
            %Interest-interest
      bearing accounts
            
            
            24
            
            
            
            38.10
            %
            
            
            (37
            )
            
            
            (37.00
            )%Late
      fees
            
            
            16
            
            
            
            6.64
            %
            
            
            121
            
            
            
            100.83
            %Imputed
      interest on Formation loan
            
            
            180
            
            
            
            36.00
            %
            
            
            105
            
            
            
            26.58
            %Other
            
            
            (35
            )
            
            
            (27.78
            )%
            
            
            (244
            )
            
            
            (65.95
            )%2,292
            
            
            
            8.39
            %
            
            
            7,137
            
            
            
            35.35
            %ExpensesMortgage
      servicing fees
            
            
            (1,030
            )
            
            
            (41.55
            )%
            
            
            743
            
            
            
            42.80
            %Interest
      expense
            
            
            (471
            )
            
            
            (20.09
            )%
            
            
            2,066
            
            
            
            743.17
            %Amortization
      of loan origination fees
            
            
            13
            
            
            
            14.29
            %
            
            
            26
            
            
            
            40.00
            %Provisions
      for losses on loans and real estateowned
            
            
            593
            
            
            
            49.62
            %
            
            
            340
            
            
            
            39.77
            %Asset
      management fees
            
            
            152
            
            
            
            15.34
            %
            
            
            177
            
            
            
            21.74
            %Clerical
      costs through Redwood Mortgage Corp.
            
            
            4
            
            
            
            1.22
            %
            
            
            31
            
            
            
            10.40
            %Professional
      services
            
            
            192
            
            
            
            83.12
            %
            
            
            84
            
            
            
            57.14
            %Amortization
      of discount on imputed interest
            
            
            180
            
            
            
            36.00
            %
            
            
            105
            
            
            
            26.58
            %Other
            
            
            (41
            )
            
            
            (13.99
            )%
            
            
            61
            
            
            
            26.29
            %(408
            )
            
            
            (4.83
            )%
            
            
            3,633
            
            
            
            75.37
            %Net
      income
            
            $
            2,700
            
            
            
            14.31
            %
            
            $
            3,504
            
            
            
            22.80
            %





Please
refer to the above table throughout the discussions of Results of
Operations.





The
increases in interest on loans, year over year, are primarily the result of
increases in the average loan portfolio.  The year end loan balances
were $305,568,000 for 2007, $261,097,000 for 2006 and $214,012,000 for
2005.  Also for 2007, the average loan portfolio yield increased from
9.78% to 9.87%.  In 2006, the average interest rate of the loan
portfolio declined to 9.78% from 9.93% for 2005.





Interest
earned on interest bearing accounts increased in 2007 compared to 2006 due to an
increase in the average yield earned from 2.17% in 2006 to 2.74% in 2007, offset
by a decrease in the average account balance of about $400,000.  The
2006 income decrease from 2005 was due to lower account balances of $2.9 million
compared to $9.1 million for 2005.  Offsetting this was an increase in
the interest rate earned from 1.1% in 2005 to 2.17% for 2006.





The
increase in late fee income for 2007 was due to the increase in loan
delinquency.  The increase in late fee income for 2006 was primarily
due to an increase in the loan portfolio size, rather than from increased
delinquency noted above.





The
increase of the imputed interest on the Formation Loan is due to the increase of
the Formation Loan from $12,693,000 at December 31, 2006 to $13,497,000 at
December 31, 2007.  The increase in 2006 was also due to an increasing
underlying loan from $11,506,000 at December 31, 2005 to $12,693,000 at December
31, 2006.  Since the Formation Loan has a zero coupon rate, the
partnership has imputed interest at the prime rate existing at the close of each
offering of units.


16


Other
income decreased in 2007 due to a decrease in the sale of certain partnership
units.  The partnership accepts unsolicited orders for units from
investors who utilize the services of a registered investment
advisor.  If an investor utilizes the services of a registered
investment advisor in acquiring units, Redwood Mortgage Corp. will contribute to
the partnership an amount equal to the sales commissions otherwise attributable
to a sale of units through a participating broker dealer.  This amount
is based on the investor’s election to retain earnings (9%) or have their
earnings distributed (5%).  In 2007 and 2006 such commissions totaled
$64,000 and $111,000 respectively.  The decrease in other income for
2006 was primarily due to a $183,000 gain on the sale of a real estate held for
sale property in 2005, whereas no such income was derived in
2006.  Also, the $111,000 of 2006 commissions described above were
less than the $148,000 for 2005.





Mortgage
servicing fees declined in 2007 due to Redwood Mortgage Corp. waiving $1,323,000
of fees for July-December, 2007.  The increase in mortgage servicing
fees for 2006 was primarily due to increases in the outstanding loan
portfolio.  The loan portfolio increased by $47,085,000 (22.00%) in
2006.





Interest
expense on the line of credit is tied to the bank’s prime rate.  The
decrease for 2007 is directly related to a decline of the weighted average
borrowing to $21,774,000 for 2007, compared to $29,032,000 for
2006.  Also, average interest rate charged decreased from 8.08% in
2006 to 7.58% for 2007.  The increase in interest expense for 2006 was
primarily due to a substantial increase in the weighted average borrowing to
$29,032,000 in 2006 from $4,536,000 in 2005, and an increase in the weighted
average interest rate to 8.08% from 6.14%.





The
increase in loan origination fees for both 2007 and 2006 was primarily due to
the costs involved in negotiating an extension of the maturity date and an
increase in the credit line facility for 2006.





The
increase in provision for losses on loans and real estate owned in 2007 and 2006
was primarily due to management’s decision to increase the allowances for losses
for loans and real estate owned due to increased loan portfolio size each year,
and in 2007, due to increased delinquency.  The number of loans 90 or
more days delinquent has increased from 9 at year end 2005, to 10 for 2006 and
19 for 2007.  The loan balances related to these loans is $26,863,000,
$30,055,000 and $49,672,000, respectively.  The number of loans in
foreclosure has increased from one in 2005, to two for 2006 and five for
2007.  The number of loans and loan portfolio balance also increased
considerably from 98 loans totaling $214,012,000 for year end 2005, to 105 loans
totaling $261,097,000 as of December 31, 2006 and 116 and $305,568,000 for
2007.





The
increase in asset management fees for 2007 and 2006 was due to an increase in
limited partners’ capital under management, which increased to $311,065 in 2007
from $270,160,000 in 2006 and $227,970,000 in 2005.





The
increase in clerical costs for 2007 and 2006 was primarily due to an increase in
partnership size and costs associated with the increased size.





The
increase in professional fees for 2007 was due to the partnership initiating
compliance work required by the Sarbanes-Oxley Act as well as costs associated
with partnership regulatory filings and the annual audit.  For 2006
the increase was due to increased fees and the timing of professional services
and costs associated with the various partnership regulatory filings, and the
annual audit.  The increase in professional services includes both the
general accounting and attorney costs.





The
increases in amortization of discount on imputed interest on the Formation Loan
are due to the increase of the Formation Loan from $12,693,000 at December 31,
2006 to $13,497,000 at 2007 year end.  The increase in 2006 was also
due to an increasing underlying loan from $11,506,000 at December 31, 2005 to
$12,693,000 at December 31, 2006.  Since the Formation Loan has a zero
coupon rate, the partnership has imputed interest at the prime rate existing at
the close of each offering of units.





The
decrease in other expenses for 2007 was caused by a reduction in upkeep costs of
the owned properties of about $60,000 offset by small increases in postage and
subscription expense.  The increase for 2006 was primarily due to an
increase in the upkeep costs of the properties owned by the partnership, which
totaled $141,000 and $118,000 in 2006 and 2005 respectively.





17


Partnership
capital continued to increase as the partnership received new limited partner
capital contributions of $32,570,000, $34,811,000 and $39,816,000 and retained
the earnings of limited partners that have chosen to do so of $12,871,000,
11,462,000 and $9,476,000 for the years 2007, 2006 and 2005,
respectively.  The fifth offering commenced on October 7, 2003 and
closed on August 3, 2005.  On August 4, 2005 the partnership commenced
its sixth offering and funds raised have been and will continue to be used to
increase the partnership’s capital base and provide funds for additional
mortgage loans.  For all offerings, as of December 31, 2007 the
limited partners total units purchased were 278,928,000 units aggregating
$279,420,000.





The
partnership began funding loans on April 14, 1993 and as of December 31, 2007
had credited earnings to limited partners who elected to retain earnings at an
average annualized yield of 7.95% since inception through December 31,
2007.  Limited partners who elected to have their earnings distributed
monthly had an average annualized yield of 7.66% since inception through
December 31, 2007.





In 1995,
the partnership established a line of credit with a commercial bank secured by
its loan portfolio.  Since its inception, the credit limit has
increased from $3,000,000 to $75,000,000.  The size of the credit line
facility could again increase as the partnership’s capital
increases.  This added source of funds may help in maximizing the
partnership’s yield by permitting the partnership to minimize the amount of
funds in lower yield investment accounts when appropriate loans are not
available.  Additionally, the loans made by the partnership generally
bear interest at a rate in excess of the rate payable to the bank, which
extended the line of credit.  As of December 31, 2007 and 2006, the
outstanding balance on the line of credit was $29,450,000 and $30,700,000,
respectively.





Allowance
for Losses.





The
general partners periodically review the loan portfolio, examining the status of
delinquencies, the underlying collateral securing these loans, borrowers’
payment records, etc.  Based upon this information and other data, the
allowance for loan losses is increased or decreased.  Borrower
foreclosures are a normal aspect of partnership operations.  The
partnership is not a credit based lender and hence while it reviews the credit
history and income of borrowers, and if applicable, the income from income
producing properties, the general partners expect that we will on occasion take
back real estate security.  At December 31, 2007 the partnership had
19 loans past due 90 days or more in interest payments totaling
$49,672,000.  Five of these 19 loans with principal totaling
$19,292,000 were past maturity.  At December 31, 2007 the partnership
has filed notices of default, beginning the process of foreclosure against five
loans all previously included in the 90 day delinquent payment category, and one
of which is a matured loan.  The principal amounts of the five filed
notices of default total $5,169,000 or 1.69% of the loan
portfolio.  The partnership occasionally allows borrowers to continue
to make the interest payments on debt past maturity for periods of
time.  There are two loans totaling $16,180,000 which have matured but
for which the borrowers are making monthly payments.  At December 31,
2007 the partnership had a combined total of 21 loans totaling $65,852,000,
which were 90 days past maturity and/or past due 90 days or more in interest
payments.





18


The
partnership occasionally enters into workout agreements with borrowers who are
past maturity or delinquent in their regular payments.  Typically, a
workout agreement allows the borrower to extend the maturity date of the balloon
payment and/or allows the borrower to make current monthly payments while
deferring for periods of time, past due payments, and allows time to pay the
loan in full.  Workout agreements and foreclosures generally exist
within our loan portfolio to greater or lesser degrees, depending primarily on
the health of the economy.  Management expects the number of
foreclosures and workout agreements will rise during difficult economic times
and conversely fall during good economic times.  The delinquencies
that exist are typical and normal for our market segment.  Workouts
and foreclosures are considered when management arrives at appropriate loan loss
reserves and based on our experience, are reflective of our loan marketplace
segment.  In 2007, the partnership filed foreclosure proceedings to
enforce the terms of its loans. In some of these instances the borrowers have
been able to remedy the foreclosures we have filed.  During 2007 the
partnership completed the foreclosure of one loan.  In 2007, one of
the properties acquired through foreclosure in 2006, was sold at a loss of
$602,000 which was offset against a valuation allowance of $919,000, allocated
for this property.  In 2006, one of the properties acquired through
foreclosure in 2004 was sold, which resulted in a loss of
$73,000.  During 2005, we completed the foreclosure of two
loans.  In 2005 the partnership sold one of these two properties for a
gain of $183,000.  In 2004, the partnership took back four properties
through foreclosure or deeds in lieu of foreclosure.  These properties
are more fully discussed under Item 2 – Properties.  We may foreclose
on additional real estate in 2008.  Borrower foreclosures are a normal
aspect of partnership operations and the general partners anticipate they will
not have a material effect on liquidity.  As a safeguard against
potential losses, the general partners have made provisions for losses on loans
and real estate owned through foreclosure of $5,886,000 at December 31,
2007.  These provisions for losses were made to guard against
collection losses.  The total cumulative provision for losses as of
December 31, 2007, is considered by the general partners to be
adequate.  Because of the number of variables involved, the magnitude
of the swings possible and the general partners’ inability to control many of
these factors, actual results may and do sometimes differ significantly from
estimates made by the general partners.





The
partnership may restructure loans, which are delinquent or past
maturity.  This is done either through the modification of an existing
loan or by re-writing a whole new loan.  It could involve, among other
changes, an extension in maturity date, a reduction in repayment amount, a
reduction in interest rate or granting an additional loan.





No loans
were restructured in 2007, 2006 and 2005.





Borrower
Liquidity and Capital Resources.





The
partnership relies upon sales of partnership units, loan payoffs, borrowers’
mortgage payments, and, to a lesser degree, its line of credit for the source of
funds for loans.  Over the past several years, mortgage interest rates
have decreased somewhat from those available at the inception of the
partnership.  If interest rates were to increase substantially, the
yield of the partnership’s loans may provide lower yields than other comparable
debt-related investments.  As such, additional limited partner unit
purchases could decline, which would reduce the overall liquidity of the
partnership.  Additionally, since the partnership has made primarily
fixed rate loans, if interest rates were to rise, the likely result would be a
slower prepayment rate for the partnership.  This could cause a lower
degree of liquidity as well as a slowdown in the ability of the partnership to
invest in loans at the then current interest rates.  Conversely, in
the event interest rates were to decline, the partnership could see both or
either of a surge of unit purchases by prospective limited partners, and
significant borrower prepayments, which, if the partnership can only obtain the
then existing lower rates of interest may cause a dilution of the partnership’s
yield on loans, thereby lowering the partnership’s overall yield to the limited
partners.  The partnership to a lesser degree relies upon its line of
credit to fund loans.  Generally, the partnership’s loans are fixed
rate, whereas the credit line is a variable rate loan.  In the event
of a significant increase in overall interest rates, the credit line rate of
interest could increase to a rate above the average portfolio rate of
interest.  Should such an event occur, the general partners would
desire to pay off the line of credit.  Retirement of the line of
credit would reduce the overall liquidity of the partnership.  Cash is
constantly being generated from borrower interest payments, late charges,
amortization of loan principal and loan payoffs.  Currently, cash flow
exceeds partnership expenses, earnings and limited partner capital payout
requirements.  Excess cash flow will be invested in new loan
opportunities, when available, and will be used to reduce the partnership credit
line or in other partnership business.





19


At the
time of subscription to the partnership, limited partners must elect either to
receive monthly, quarterly or annual cash distributions from the partnership, or
to compound earnings in their capital account.  If an investor
initially elects to receive monthly, quarterly or annual distributions, such
election, once made, is irrevocable.  If the investor initially elects
to compound earnings in his/her capital account, in lieu of cash distributions,
the investor may, after three (3) years, change the election and receive
monthly, quarterly or annual cash distributions.  Earnings allocable
to limited partners who elect to compound earnings in their capital account,
will be retained by the partnership for making further loans or for other proper
partnership purposes, and such amounts will be added to such limited partners’
capital accounts.





During
the years stated below, the partnership, after allocation of syndication costs,
made the following allocation of earnings both to the limited partners who
elected to compound their earnings, and those that chose to
distribute:




2007
            
            
            
            2006
            
            
            
            2005Compounding
            
            $
            12,871,000
            
            
            $
            11,462,000
            
            
            $
            9,476,000Distributing
            
            $
            8,132,000
            
            
            $
            6,887,000
            
            
            $
            5,481,000





Capital
balances of limited partners electing to receive cash distributions of earnings
represented 40%, 38% and 37% of the limited partners’ outstanding capital
accounts as of December 31, 2007, 2006 and 2005, respectively.  These
percentages have remained relatively stable.  The general partners
anticipate after all capital has been raised, the percentage of limited partners
electing to withdraw earnings will decrease due to the dilution effect which
occurs when compounding limited partners’ capital accounts grow through earnings
reinvestment.





The
partnership also allows the limited partners to withdraw their capital account
subject to certain limitations and penalties (see “Withdrawal From Partnership”
in the Limited Partnership Agreement).  Once a limited partner’s
initial five-year holding period has passed, the general partners expect to see
an increase in liquidations due to the ability of limited partners to withdraw
without penalty.  This ability to withdraw five years after a limited
partner’s investment has the effect of providing limited partner liquidity and
the general partners expect a portion of the limited partners to avail
themselves of this liquidity.  This has the anticipated effect of
increasing the net capital of the partnership, primarily through retained
earnings during the offering period.  The general partners expect to
see increasing numbers of limited partner withdrawals during a limited partner’s
5th
through 10th
anniversary, at which time the bulk of those limited partners who have sought
withdrawal have been liquidated.  Since the five-year hold period for
most limited partners has yet to expire, as of December 31, 2007, many limited
partners may not as yet avail themselves of this provision for
liquidation.  Earnings and capital liquidations including early
withdrawals during the three years ended December 31, 2007 were:





2007
            
            
            
            2006
            
            
            
            2005Cash
      distributions
            
            $
            8,132,000
            
            
            $
            6,887,000
            
            
            $
            5,481,000Capital
      liquidation*
            
            $
            3,766,000
            
            
            $
            3,039,000
            
            
            $
            2,040,000Total
            
            $
            11,898,000
            
            
            $
            9,926,000
            
            
            $
            7,521,000





*  These
amounts represent gross of early withdrawal penalties.





Limited
partners may liquidate their investment over a one-year period subject to
certain limitations and penalties.  During the past three years ended
December 31, 2007, capital liquidated subject to the 10% penalty for early
withdrawal, included in the distribution amounts above, was:




2007
            
            
            
            2006
            
            
            
            2005$
            1,001,000
            
            
            $
            839,000
            
            
            $
            592,000





This
represents 0.32%, 0.31% and 0.25% of the limited partners’ ending capital for
the years ended December 31, 2007, 2006 and 2005, respectively.  These
withdrawals are within the normally anticipated range and represent a small
percentage of limited partner capital.





20


In some
cases in order to satisfy Broker Dealers and other reporting requirements, the
general partners have valued the limited partners’ interest in the partnership
on a basis which utilizes a per unit system of calculation, rather than based
upon the investors’ capital account.  This information has been
reported in this manner in order to allow the partnership to integrate with
certain software used by the Broker Dealers and other reporting
entities.  In those cases, the partnership will report to Broker
Dealers, Trust Companies and others a “reporting” number of units based upon a
$1.00 per unit calculation.  The number of reporting units provided
will be calculated based upon the limited partner’s capital account value
divided by $1.00.  Each investor’s capital account balance is set
forth periodically on the partnership account statement provided to
investors.  The reporting units are solely for Broker Dealers
requiring such information for their software programs and do not reflect actual
units owned by a limited partner or the limited partners’ right or interest in
cash flow or any other economic benefit in the partnership.  Each
investor’s capital account balance is set forth periodically on the partnership
account statement provided to investors.  The amount of partnership
earnings each investor is entitled to receive is determined by the ratio that
each investor’s capital account bears to the total amount of all investor
capital accounts then outstanding.  The capital account balance of
each investor should be included on any FINRA member client account statement in
providing a per unit estimated value of the client’s investment in the
partnership in accordance with NASD Rule 2340.





While the
general partners have set an estimated value for the partnership units, such
determination may not be representative of the ultimate price realized by an
investor for such units upon sale.  No public trading market exists
for the partnership’s units and none is likely to develop.  Thus,
there is no certainty that the units can be sold at a price equal to the stated
value of the capital account. Furthermore, the ability of an investor to
liquidate his or her investment is limited subject to certain liquidation rights
provided by the partnership, which may include early withdrawal penalties (See
the section of the Prospectus entitled “Risk Factors - Purchase of Units is a
Long Term Investment”).





Current
Economic Conditions.





The
partnership makes loans secured by California real estate.  The health
of the California economy and real estate market is of primary concern to the
partnership as we rely upon the equity securing our loans for
repayment.  The majority of our loans are secured by property located
in Northern California, dominated by loans made in the nine counties of the San
Francisco Bay Area.  As of December 31, 2007, approximately 61.48% of
the loans held by the partnership were located in the nine counties which
comprise the San Francisco Bay Area region.





The
California economy like the overall U.S. economy has slowed during the latter
part of 2007.  California unemployment decreased from 5.1% in December
of 2005, to 4.9% in December of 2006 and then steadily increased throughout 2007
to a rate of 5.9% as of December 2007.  According to UCLA Anderson
Forecast Economists Ryan Ratcliff and Jerry Nickelsburg, California’s economy is
expected to experience a slightly slower and prolonged period of sluggishness,
but no recession.  They expect unemployment to peak at 6.1% in late
2008, with non-farm payroll growth remaining below 1% through the end of next
year.  Real growth in Gross State Product and Personal Income is
expected to be in the 1-2% range over the same period.





Residential
real estate values are important to the partnership as they provide the security
behind our loans.  During 2006, residential real estate sales volumes
began to decline from their highs in 2005.  The reduction in sales
volumes continued throughout 2007.  In 2006 California residential
real estate sales volumes declined 15.3% from 2005 and sales volumes further
declined 26% compared to 2006 according to the California Association of
Realtors (CAR).  In spite of these lower sales volumes, CAR reported
the median sales price of a single family home in California increased in 2007
by 0.3%, from $556,430 to $558,100.  These numbers indicate a
relatively stable market, but residential real estate values are very much
locally driven.  CAR indicated regional price reductions in their
median price value.  Examples include the California High Desert,
Central Valley, and Sacramento regions experiencing price reductions between 6%
and 10% in 2007.  Larger metropolitan regions such as the San
Francisco Bay Area, Los Angeles, Santa Clara and Santa Barbara experienced price
increases of 0.7% to 7.0%.  The slow down in residential real estate
appreciation and the price depreciation in various regions is of concern to the
partnership as depreciation erodes the value of the real estate assets securing
its loans.





Commercial
real estate has fared well in 2007.  Rents continued to remain stable
or escalate.  As reported by NAI BT Commercial, the San Francisco Bay
Area as a whole reported a 40 basis-point decrease in vacancy from 2006 to push
vacancy rates to 11.25% at the close of 2007.  This marked the lowest
vacancy level for the Bay Area’s office market since the second quarter of
2001.  The overall average asking rate increased almost $0.50 during
2007 closing the year at $2.98 per square foot full service.  This
represented a 19% increase from 2006 and a 44% increase from $2.07 nearly four
years ago.  Strong commercial rents and occupancy combined to keep
values strong and stable a healthy result for the commercial portion of the
partnership’s portfolio.





21


For the
partnership loans outstanding at December 31, 2007, the partnership had an
average loan-to-value of 67.29% computed based on appraised values and senior
liens as of the date the loan was made.  This percentage does not
account for any increases or decreases in property values since the date the
loan was made, nor does it include any reductions in principal on senior
indebtedness through amortization of payments after the loan was
made.  Management believes low loan-to value ratios will assist the
partnership in weathering loan delinquencies and foreclosures when they
occur.





Contractual
Obligations





A summary
of the contractual obligations of the partnership as of December 31, 2007 is set
forth below (in thousands):




Contractual
      Obligation
            
            Total
            
            
            Less
      than 1 Year
            
            
            1-3
      Years
            
            
            3-5
      YearsLine
      of credit
            
            $
            29,450
            
            
            $
            —
            
            
            $
            20,454
            
            
            $
            8,996Construction
      loans
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Rehabilitation
      loans
            
            
            6,997
            
            
            
            6,997
            
            
            
            —
            
            
            
            —Total
            
            $
            36,447
            
            
            $
            6,997
            
            
            $
            20,454
            
            
            $
            8,996








Item 7a – Quantitative and
Qualitative Disclosures About Market Risk





The
following table contains information about the cash held in money market
accounts, loans held in the partnership’s portfolio and our line of credit as of
December 31, 2007.  The presentation, for each category of
information, aggregates the assets and liabilities by their maturity dates for
maturities occurring in each of the years 2008 through 2012 and separately
aggregates the information for all maturities arising after 2012.  The
carrying values of these assets and liabilities approximate their fair values as
of December 31, 2007 (in thousands).





2008
            
            
            2009
            
            
            2010
            
            
            2011
            
            
            2012
            
            
            Thereafter
            
            
            TotalInterest
      earning assets:Money
      market accounts
            
            $
            566
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            566Average
      interest rate
            
            
            2.49
            %
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            2.49
            %Loans
      secured by deeds of trust
            
            $
            186,715
            
            
            $
            61,384
            
            
            $
            36,713
            
            
            $
            6,935
            
            
            $
            12,049
            
            
            $
            1,772
            
            
            $
            305,568Average
      interest rate
            
            
            9.94
            %
            
            
            10.05
            %
            
            
            9.84
            %
            
            
            9.31
            %
            
            
            9.66
            %
            
            
            9.37
            %
            
            
            9.92
            %Interest
      bearing liabilitiesLine
      of credit
            
            $
            —
            
            
            $
            818
            
            
            $
            9,818
            
            
            $
            9,818
            
            
            $
            8,996
            
            
            $
            —
            
            
            $
            29,450Average
      interest rate
            
            
            6.75
            %
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            6.75
            %








Market
Risk.





The
partnership’s line of credit bears interest at a variable rate, tied to the
prime rate.  As a result, the partnership’s primary market risk
exposure with respect to its obligations is to changes in interest rates, which
will affect the interest cost of outstanding amounts on the line of
credit.  The partnership may also suffer market risk tied to general
trends affecting real estate values that may impact the partnership’s security
for its loans.





22


The
partnership’s primary market risk in terms of its profitability is the exposure
to fluctuations in earnings resulting from fluctuations in general interest
rates.  The majority of the partnership’s mortgage loans earn interest
at fixed rates.  Changes in interest rates may also affect the value
of the partnership’s investment in mortgage loans and the rates at which the
partnership reinvests funds obtained from loan repayments and new capital
contributions from limited partners. If interest rates increase, the interest
rates the partnership obtains from reinvested funds will generally increase, but
the value of the partnership’s existing loans at fixed rates will generally tend
to decrease.  The risk is mitigated by the fact that the partnership
does not intend to sell its loan portfolio, rather such loans are held until
they are paid off.  If interest rates decrease, the amounts becoming
available to the partnership for investment due to repayment of partnership
loans may be reinvested at lower rates than the partnership had been able to
obtain in prior investments, or than the rates on the repaid
loans.  In addition, interest rate decreases may encourage borrowers
to refinance their loans with the partnership at a time where the partnership is
unable to reinvest in loans of comparable value.





The
partnership does not hedge or otherwise seek to manage interest rate
risk.  The partnership does not enter into risk sensitive instruments
for trading purposes.








PORTFOLIO
REVIEW – For the years ended December 31, 2007, 2006 and
2005





Secured
Loan Portfolio.





The
partnership’s secured loan portfolio consists primarily of short-term (one to
five years), fixed rate loans secured by real estate.  As of December
31, 2007, 2006 and 2005 the partnership’s loans secured by real property
collateral in the nine San Francisco Bay Area counties (San Francisco, San
Mateo, Santa Clara, Alameda, Contra Costa, Napa, Solano, Sonoma, and Marin)
represented $187,834,000 (61.48), $152,997,000 (58.60%) and $153,632,000
(71.78%), respectively, of the outstanding secured loan
portfolio.  The remainder of the portfolio represented loans secured
by real estate located primarily in Northern California.





The
following table sets forth the distribution of loans held by the partnership by
property type for the years ended December 31, 2007, 2006 and 2005 (in
thousands):





December
      31,





2007
            
            2006
            
            2005





Single
      Family (1-4 units)
            
            $
            191,608
            
            
            
            62.70
            %
            
            $
            190,859
            
            
            
            73.10
            %
            
            $
            116,945
            
            
            
            54.64
            %Apartments
      (over 4 units)
            
            
            9,369
            
            
            
            3.07
            %
            
            
            14,914
            
            
            
            5.71
            %
            
            
            19,209
            
            
            
            8.98
            %Commercial
            
            
            100,933
            
            
            
            33.03
            %
            
            
            53,262
            
            
            
            20.40
            %
            
            
            65,167
            
            
            
            30.45
            %Land
            
            
            3,658
            
            
            
            1.20
            %
            
            
            2,062
            
            
            
            0.79
            %
            
            
            12,691
            
            
            
            5.93
            %Total
            
            $
            305,568
            
            
            
            100.00
            %
            
            $
            261,097
            
            
            
            100.00
            %
            
            $
            214,012
            
            
            
            100.00
            %





23


As of
December 31, 2007, the partnership held 116 loans secured by deeds of
trust.  The following table sets forth the priorities, asset
concentrations and maturities of the loans held by the partnership as of
December 31, 2007.








PRIORITIES,
ASSET CONCENTRATIONS AND MATURITIES OF SECURED LOANS


As
of December 31, 2007 (in thousands)





#
      of Loans
            
            
            Amount
            
            
            Percent1st
      Mortgages
            
            
            62
            
            
            $
            138,965
            
            
            
            45.48
            %2nd
      Mortgages
            
            
            51
            
            
            
            166,103
            
            
            
            54.36
            %3rd
      Mortgages
            
            
            3
            
            
            
            500
            
            
            
            0.16
            %Total
            
            
            116
            
            
            $
            305,568
            
            
            
            100.00
            %Maturing
      prior to 12/31/08
            
            
            38
            
            
            $
            186,715
            
            
            
            61.11
            %Maturing
      between 01/01/09 and 12/31/09
            
            
            26
            
            
            
            61,384
            
            
            
            20.09
            %Maturing
      between 01/01/10 and 12/31/10
            
            
            17
            
            
            
            36,713
            
            
            
            12.01
            %Maturing
      after 12/31/10
            
            
            35
            
            
            
            20,756
            
            
            
            6.79
            %Total
            
            
            116
            
            
            $
            305,568
            
            
            
            100.00
            %Average
      secured loan as a % of secured loan portfolio
            
            
            
            
            
            $
            2,634
            
            
            
            0.86
            %Largest
      secured loan as a % of secured loan portfolio
            
            
            
            
            
            
            34,383
            
            
            
            11.25
            %Smallest
      secured loan as a % of secured loan portfolio
            
            
            
            
            
            
            61
            
            
            
            0.02
            %Average
      secured loan-to-appraised values of securitybased
      on appraised values and prior liens at timeloan
      was consummated
            
            
            
            
            
            
            
            
            
            
            67.29
            %Largest
      secured loan as a % of partnership assets
            
            
            
            
            
            
            34,383
            
            
            
            9.95
            %








ASSET
QUALITY





A
consequence of lending activities is that occasionally losses will be
experienced and that the amount of such losses will vary from time to time,
depending upon the risk characteristics of the loan portfolio as affected by
economic conditions and the financial experiences of borrowers.  Many
of these factors are beyond the control of the general
partners.  There is no precise method of predicting specific losses or
amounts that ultimately may be charged off on particular segments of the loan
portfolio, especially in light of the current economic environment.





24


The
conclusion a loan may become uncollectible, in whole or in part, is a matter of
judgment.  Although institutional lenders are subject to requirements
and regulations that, among other things, require them to perform ongoing
analyses of their portfolios, loan-to-value ratios, reserves, etc., and to
obtain and maintain current information regarding their borrowers and the
securing properties, the partnership is not subject to these regulations and has
not adopted certain of these practices.  Rather, the general partners,
in connection with the periodic closing of the accounting records of the
partnership and the preparation of the financial statements, determine whether
the allowance for loan losses is adequate to cover potential losses of the
partnership.  As of December 31, 2007, the general partners have
determined the allowance for loan losses and losses on real estate owned of
$5,886,000 (1.89% of net assets) is adequate in amount.  Because of
the number of variables involved, the magnitude of the swings possible and the
general partners’ inability to control many of these factors, actual results may
and do sometimes differ significantly from estimates made by the general
partners.  At December 31, 2007, the partnership had 19 loans past due
90 days or more in interest payments totaling $49,672,000.  Three of
these 19 loans with principal totaling $15,620,000 were past due 90 days or more
in interest payments and past maturity.  With respect to one of these
three past maturity loans and four of the loans that is 90 days or more
delinquent in interest payments, the partnership has filed notices of default,
beginning the process of foreclosure.  The principal amounts of the
five filed notices of default total $5,169,000 or 1.69% of the loan
portfolio.  The partnership allows borrowers to occasionally continue
to make the interest payments on debt past maturity for periods of
time.  At December 31, 2007 the partnership had a combined total of 21
loans totaling $65,852,000, which were 90 days past maturity and/or past due 90
days or more in interest payments.





The
partnership also makes loans requiring periodic disbursements of
funds.  As of December 31, 2007 there were twelve such
loans.  These include loans for the ground up construction of
buildings and loans for rehabilitation of existing structures. Interest on these
loans is computed with the simple interest method and only on the amounts
disbursed on a daily basis.





A summary
of the status of the partnership’s loans, which are periodically disbursed as of
December 31, 2007, is set forth below (in thousands):





Complete
      Construction
            
            Rehabilitation





Disbursed
      funds
            
            $
            —
            
            
            $
            90,324Undisbursed
      funds
            
            $
            —
            
            
            $
            6,997





“Construction
Loans” are determined by the management to be those loans made to borrowers for
the construction of entirely new structures or dwellings, whether residential,
commercial or multifamily properties.  For each such Construction
Loan, the partnership has approved a maximum balance for such loan; however,
disbursements are made in phases throughout the construction
process.  As of December 31, 2007, the partnership had no commitments
for Construction Loans.  Funding of Construction loans is limited to
10% of the loan portfolio.





The
partnership also makes loans, the proceeds of which are used to remodel, add to
and/or rehabilitate an existing structure or dwelling, whether residential,
commercial or multifamily properties and which, in the determination of
management, are not construction loans.  Many of these loans are for
cosmetic refurbishment of both interiors and exteriors of existing
condominiums.  The refurbished units will then be sold to new owners,
repaying the partnership’s loan. These loans are referred to by management as
“Rehabilitation Loans”.  As of December 31, 2007 the partnership had
funded $90,324,000 in Rehabilitation Loans and $6,997,000 remained to be
disbursed for a combined total of $97,321,000.  While the partnership
does not classify Rehabilitation Loans as Construction Loans, Rehabilitation
Loans carry some of the same risks as Construction Loans.  There is no
limit on the amount of Rehabilitation Loans the partnership may
make.








25


Item 8 – Consolidated
Financial Statements and Supplementary Data





A
– Consolidated Financial Statements





The
following consolidated financial statements of Redwood Mortgage Investors VIII
are included in Item 8:





·
            Report
      of Independent Registered Public Accounting Firm·
            Consolidated
      Balance Sheets - December 31, 2007 and December 31,
2006·
            Consolidated
      Statements of Income for the years ended December 31, 2007, 2006 and
      2005·
            Consolidated
      Statements of Changes In Partners’ Capital for the years ended December
      31, 2007, 2006 and 2005·
            Consolidated
      Statements of Cash Flows for the years ended December 31, 2007, 2006 and
      2005·
            Notes
      to Consolidated Financial
Statements





B
– Consolidated Financial Statement Schedules





The
following consolidated financial statement schedules of Redwood Mortgage
Inventors VIII are included in Item 8.





·
            Schedule
      II  –  Valuation and Qualifying
    Accounts·
            Schedule
      IV –  Loans on Real
Estate





All other
schedules for which provision is made in the applicable accounting regulations
of the Securities and Exchange Commission are not required under the related
instructions or are inapplicable, and therefore have been
omitted.


26





























REDWOOD MORTGAGE INVESTORS
VIII


(A CALIFORNIA LIMITED
PARTNERSHIP)


CONSOLIDATED FINANCIAL
STATEMENTS


AND SUPPLEMENTAL
INFORMATION


DECEMBER 31, 2007 AND
2006


AND FOR EACH OF THE THREE
YEARS


IN THE PERIOD ENDED DECEMBER
31, 2007








27




















TABLE OF
CONTENTS








Page
      No.Report
      of Independent Registered Public Accounting Firm
            
            29Consolidated
      Balance Sheets
            
            30Consolidated
      Statements of Income
            
            31Consolidated
      Statements of Changes in Partners’ Capital
            
            32Consolidated
      Statements of Cash Flows
            
            34Notes
      to Consolidated Financial Statements
            
            35Supplemental
      SchedulesSchedule
      II - Valuation and Qualifying Accounts
            
            55Schedule
      IV - Mortgage Loans on Real EstateRule
      12-29 Loans on Real Estate
            
            56



















28















REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM











To the
Partners


Redwood
Mortgage Investors VIII


Redwood
City, California







We have
audited the accompanying consolidated balance sheets of Redwood Mortgage
Investors VIII (a California limited partnership) as of December 31, 2007 and
2006 and the related consolidated statements of income, changes in partners’
capital and cash flows for each of the three years in the period ended December
31, 2007. These consolidated financial statements are the responsibility of
Redwood Mortgage Investors VIII’s management. Our responsibility is to express
an opinion on these consolidated financial statements based on our
audits.




We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. Redwood Mortgage
Investors VIII is not required to have, nor were we engaged to perform, an audit
of its internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of Redwood
Mortgage Investors VIII’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.




In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Redwood
Mortgage Investors VIII as of December 31, 2007 and 2006 and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 2007 in conformity with accounting principles
generally accepted in the United States of America.




Our
audits were conducted for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. Schedules II and IV are
presented for purposes of additional analysis and are not a required part of the
basic consolidated financial statements. Such information has been subjected to
the auditing procedures applied in the audits of the basic consolidated
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic consolidated financial statements taken as a
whole.








ARMANINO
McKENNA  LLP


San
Ramon, California


March 28,
2008


29


REDWOOD
MORTGAGE INVESTORS VIII


(A
California Limited Partnership)


Consolidated
Balance Sheets


December
31, 2007 and 2006


(in
thousands)





ASSETS




2007
            
            
            
            2006Cash
      and cash equivalents
            
            $
            11,591
            
            
            $
            18,096LoansLoans,
      secured by deeds of trust
            
            
            305,568
            
            
            
            261,097Loans,
      unsecured, net
            
            
            345
            
            
            
            —Allowance
      for loan losses
            
            
            (4,469
            )
            
            
            (2,786
            )Net
      loans
            
            
            301,444
            
            
            
            258,311Interest
      and other receivablesAccrued
      interest and late fees
            
            
            5,600
            
            
            
            3,384Due
      from affiliate
            
            
            764
            
            
            
            —Advances
      on loans
            
            
            2,358
            
            
            
            96Total
      interest and other receivables
            
            
            8,722
            
            
            
            3,480Real
      estate ownedReal
      estate held
            
            
            20,547
            
            
            
            16,961Real
      estate held for sale
            
            
            4,479
            
            
            
            10,618Allowance
      for real estate losses
            
            
            (1,417
            )
            
            
            (2,348
            )Net
      real estate
            
            
            23,609
            
            
            
            25,231Loan
      origination fees, net
            
            
            117
            
            
            
            104Total
      assets
            
            $
            345,483
            
            
            $
            305,222





LIABILITIES AND PARTNERS’
CAPITAL




LiabilitiesLine
      of credit
            
            $
            29,450
            
            
            $
            30,700Accounts
      payable
            
            
            62
            
            
            
            76Deferred
      revenue
            
            
            355
            
            
            
            —Payable
      to affiliate
            
            
            557
            
            
            
            481Total
      liabilities
            
            
            30,424
            
            
            
            31,257Investors
      in applicant status
            
            
            492
            
            
            
            557Minority
      interest
            
            
            3,240
            
            
            
            3,017Partners’
      capitalLimited
      partners’ capital, subject to redemption, net of
    unallocatedsyndication
      costs of $1,791 and $1,743 for 2007 and 2006,
respectively;and
      net of Formation Loan receivable of $13,497 and $12,6932007
      and 2006, respectively
            
            
            311,065
            
            
            
            270,160General
      partners’ capital, net of unallocated syndication costs of
    $18and
      $18 for 2007 and 2006, respectively
            
            
            262
            
            
            
            231Total
      partners’ capital
            
            
            311,327
            
            
            
            270,391Total
      liabilities and partners’ capital
            
            $
            345,483
            
            
            $
            305,222





The
accompanying notes are an integral part of these consolidated financial
statements.


30


REDWOOD
MORTGAGE INVESTORS VIII


(A
California Limited Partnership)


Consolidated
Statements of Income


For
the Years Ended December 31, 2007, 2006 and 2005


(in
thousands, except for per limited partner amounts)





2007
            
            
            
            2006
            
            
            
            2005RevenuesInterest
      on loans
            
            $
            28,502
            
            
            $
            26,395
            
            
            $
            19,203Interest-interest
      bearing accounts
            
            
            87
            
            
            
            63
            
            
            
            100Late
      fees
            
            
            257
            
            
            
            241
            
            
            
            120Imputed
      interest on Formation loan
            
            
            680
            
            
            
            500
            
            
            
            395Other
            
            
            91
            
            
            
            126
            
            
            
            370Total
      revenues
            
            
            29,617
            
            
            
            27,325
            
            
            
            20,188ExpensesMortgage
      servicing fees
            
            
            1,449
            
            
            
            2,479
            
            
            
            1,736Interest
      expense
            
            
            1,873
            
            
            
            2,344
            
            
            
            278Amortization
      of loan origination fees
            
            
            104
            
            
            
            91
            
            
            
            65Provision
      for losses on loans and real estate owned
            
            
            1,788
            
            
            
            1,195
            
            
            
            855Asset
      management fees
            
            
            1,143
            
            
            
            991
            
            
            
            814Clerical
      costs from Redwood Mortgage Corp.
            
            
            333
            
            
            
            329
            
            
            
            298Professional
      services
            
            
            423
            
            
            
            231
            
            
            
            147Amortization
      of discount on imputed interest
            
            
            680
            
            
            
            500
            
            
            
            395Other
            
            
            252
            
            
            
            293
            
            
            
            232Total
      expenses
            
            
            8,045
            
            
            
            8,453
            
            
            
            4,820Net
      income
            
            $
            21,572
            
            
            $
            18,872
            
            
            $
            15,368Net
      incomeGeneral
      partners (1%)
            
            $
            216
            
            
            $
            188
            
            
            $
            154Limited
      partners (99%)
            
            
            21,356
            
            
            
            18,684
            
            
            
            15,214$
            21,572
            
            
            $
            18,872
            
            
            $
            15,368Net
      income per $1,000 invested bylimited
      partners for entire periodWhere
      income is reinvested
            
            $
            71
            
            
            $
            71
            
            
            $
            70Where
      partner receives income in monthly distributions
            
            $
            69
            
            
            $
            69
            
            
            $
            68








The
accompanying notes are an integral part of these consolidated financial
statements.


31


REDWOOD
MORTGAGE INVESTORS VIII


(A
California Limited Partnership)


Consolidated
Statements of Changes in Partners’ Capital


For
the Years Ended December 31, 2007, 2006 and 2005


(in
thousands)





Limited
      PartnersInvestors
            
            
            Capital
            
            
            
            
            
            
            
            
            TotalIn
            
            
            Account
            
            
            Unallocated
            
            
            Formation
            
            
            LimitedApplicant
            
            
            Limited
            
            
            Syndication
            
            
            Loan,
            
            
            Partners’Status
            
            
            Partners
            
            
            Costs
            
            
            Gross
            
            
            CapitalBalances
      at December 31, 2004
            
            $
            424
            
            
            $
            194,203
            
            
            $
            (1,084
            )
            
            $
            (9,751
            )
            
            $
            183,368Contributions
      on application
            
            
            39,816
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Formation
      loan increases
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (2,978
            )
            
            
            (2,978
            )Formation
      loan payments received
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            1,178
            
            
            
            1,178Interest
      credited to partners in applicant status
            
            
            41
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Interest
      withdrawn
            
            
            (15
            )
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Transfers
      to partners’ capital
            
            
            (39,490
            )
            
            
            39,490
            
            
            
            —
            
            
            
            —
            
            
            
            39,490Net
      income
            
            
            —
            
            
            
            15,214
            
            
            
            —
            
            
            
            —
            
            
            
            15,214Syndication
      costs incurred
            
            
            —
            
            
            
            —
            
            
            
            (837
            )
            
            
            —
            
            
            
            (837
            )Allocation
      of syndication costs
            
            
            —
            
            
            
            (257
            )
            
            
            257
            
            
            
            —
            
            
            
            —Partners’
      withdrawals
            
            
            —
            
            
            
            (7,465
            )
            
            
            —
            
            
            
            —
            
            
            
            (7,465
            )Early
      withdrawal penalties
            
            
            —
            
            
            
            (56
            )
            
            
            11
            
            
            
            45
            
            
            
            —Balances
      at December 31, 2005
            
            
            776
            
            
            
            241,129
            
            
            
            (1,653
            )
            
            
            (11,506
            )
            
            
            227,970Contributions
      on application
            
            
            34,811
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Formation
      loan increases
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (2,674
            )
            
            
            (2,674
            )Formation
      loan payments received
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            1,422
            
            
            
            1,422Interest
      credited to partners in applicant status
            
            
            21
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Interest
      withdrawn
            
            
            (7
            )
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Transfers
      to partners’ capital
            
            
            (35,044
            )
            
            
            35,044
            
            
            
            —
            
            
            
            —
            
            
            
            35,044Net
      income
            
            
            —
            
            
            
            18,684
            
            
            
            —
            
            
            
            —
            
            
            
            18,684Syndication
      costs incurred
            
            
            —
            
            
            
            —
            
            
            
            (440
            )
            
            
            —
            
            
            
            (440
            )Allocation
      of syndication costs
            
            
            —
            
            
            
            (335
            )
            
            
            335
            
            
            
            —
            
            
            
            —Partners’
      withdrawals
            
            
            —
            
            
            
            (9,846
            )
            
            
            —
            
            
            
            —
            
            
            
            (9,846
            )Early
      withdrawal penalties
            
            
            —
            
            
            
            (80
            )
            
            
            15
            
            
            
            65
            
            
            
            —Balances
      at December 31, 2006
            
            
            557
            
            
            
            284,596
            
            
            
            (1,743
            )
            
            
            (12,693
            )
            
            
            270,160Contributions
      on application
            
            
            32,570
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Formation
      loan increases
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (2,444
            )
            
            
            (2,444
            )Formation
      loan payments received
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            1,564
            
            
            
            1,564Interest
      credited to partners in applicant status
            
            
            28
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Interest
      withdrawn
            
            
            (11
            )
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Transfers
      to partners’ capital
            
            
            (32,652
            )
            
            
            32,652
            
            
            
            —
            
            
            
            —
            
            
            
            32,652Net
      income
            
            
            —
            
            
            
            21,356
            
            
            
            —
            
            
            
            —
            
            
            
            21,356Syndication
      costs incurred
            
            
            —
            
            
            
            —
            
            
            
            (418
            )
            
            
            —
            
            
            
            (418
            )Allocation
      of syndication costs
            
            
            —
            
            
            
            (353
            )
            
            
            353
            
            
            
            —
            
            
            
            —Partners’
      withdrawals
            
            
            —
            
            
            
            (11,805
            )
            
            
            —
            
            
            
            —
            
            
            
            (11,805
            )Early
      withdrawal penalties
            
            
            —
            
            
            
            (93
            )
            
            
            17
            
            
            
            76
            
            
            
            —Balances
      at December 31, 2007
            
            $
            492
            
            
            $
            326,353
            
            
            $
            (1,791
            )
            
            $
            (13,497
            )
            
            $
            311,065





The
accompanying notes are an integral part of these consolidated financial
statements.





32


REDWOOD
MORTGAGE INVESTORS VIII


(A
California Limited Partnership)


Consolidated
Statements of Changes in Partners’ Capital (continued)


For
the Years Ended December 31, 2007, 2006 and 2005


(in
thousands)








General
      PartnersCapital
            
            
            
            
            
            TotalAccount
            
            
            Unallocated
            
            
            General
            
            
            TotalGeneral
            
            
            Syndication
            
            
            Partners’
            
            
            Partners’Partners
            
            
            Costs
            
            
            Capital
            
            
            CapitalBalances
      at December 31, 2003
            
            $
            174
            
            
            $
            (11
            )
            
            $
            163
            
            
            $
            183,531Contributions
      on application
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Formation
      loan increases
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (2,978
            )Formation
      loan payments received
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            1,178Interest
      credited to partners in applicant status
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Interest
      withdrawn
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Capital
      contributed
            
            
            40
            
            
            
            —
            
            
            
            40
            
            
            
            39,530Net
      income
            
            
            154
            
            
            
            —
            
            
            
            154
            
            
            
            15,368Syndication
      costs incurred
            
            
            —
            
            
            
            (8
            )
            
            
            (8
            )
            
            
            (845
            )Allocation
      of syndication costs
            
            
            (3
            )
            
            
            3
            
            
            
            —
            
            
            
            —Partners’
      withdrawals
            
            
            (152
            )
            
            
            —
            
            
            
            (152
            )
            
            
            (7,617
            )Early
      withdrawal penalties
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Balances
      at December 31, 2005
            
            
            213
            
            
            
            (16
            )
            
            
            197
            
            
            
            228,167Contributions
      on application
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Formation
      loan increases
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (2,674
            )Formation
      loan payments received
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            1,422Interest
      credited to partners in applicant status
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Interest
      withdrawn
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Capital
      contributed
            
            
            35
            
            
            
            —
            
            
            
            35
            
            
            
            35,079Net
      income
            
            
            188
            
            
            
            —
            
            
            
            188
            
            
            
            18,872Syndication
      costs incurred
            
            
            —
            
            
            
            (5
            )
            
            
            (5
            )
            
            
            (445
            )Allocation
      of syndication costs
            
            
            (3
            )
            
            
            3
            
            
            
            —
            
            
            
            —Partners’
      withdrawals
            
            
            (184
            )
            
            
            —
            
            
            
            (184
            )
            
            
            (10,030
            )Early
      withdrawal penalties
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Balances
      at December 31, 2006
            
            
            249
            
            
            
            (18
            )
            
            
            231
            
            
            
            270,391Contributions
      on application
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Formation
      loan increases
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (2,444
            )Formation
      loan payments received
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            1,564Interest
      credited to partners in applicant status
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Interest
      withdrawn
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Capital
      contributed
            
            
            31
            
            
            
            —
            
            
            
            31
            
            
            
            32,683Net
      income
            
            
            216
            
            
            
            —
            
            
            
            216
            
            
            
            21,572Syndication
      costs incurred
            
            
            —
            
            
            
            (4
            )
            
            
            (4
            )
            
            
            (422
            )Allocation
      of syndication costs
            
            
            (4
            )
            
            
            4
            
            
            
            —
            
            
            
            —Partners’
      withdrawals
            
            
            (212
            )
            
            
            —
            
            
            
            (212
            )
            
            
            (12,017
            )Early
      withdrawal penalties
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Balances
      at December 31, 2007
            
            $
            280
            
            
            $
            (18
            )
            
            $
            262
            
            
            $
            311,327





The
accompanying notes are an integral part of these consolidated financial
statements.


33


REDWOOD
MORTGAGE INVESTORS VIII


(A
California Limited Partnership)


Consolidated
Statements of Cash Flows


For
the Years Ended December 31, 2007, 2006 and 2005


(in
thousands)




2007
            
            
            
            2006
            
            
            
            2005Cash
      flows from operating activitiesNet
      income
            
            $
            21,572
            
            
            $
            18,872
            
            
            $
            15,368Adjustments
      to reconcile net income tonet
      cash provided by operating activitiesAmortization
      of loan origination fees
            
            
            104
            
            
            
            91
            
            
            
            65Imputed
      interest income
            
            
            (680
            )
            
            
            (500
            )
            
            
            (395
            )Amortization
      of discount
            
            
            680
            
            
            
            500
            
            
            
            395Provision
      for losses on loans and real estate owned
            
            
            1,788
            
            
            
            1,195
            
            
            
            855Realized
      (gain) loss on sale of real estate
            
            
            —
            
            
            
            —
            
            
            
            (183
            )Change
      in operating assets and liabilitiesAccrued
      interest and late fees
            
            
            (2,749
            )
            
            
            (578
            )
            
            
            1,040Advances
      on loans
            
            
            (2,317
            )
            
            
            (109
            )
            
            
            (63
            )Due
      from affiliate
            
            
            (764)Loan
      origination fees
            
            
            (117
            )
            
            
            (122
            )
            
            
            (75
            )Accounts
      payable
            
            
            (14)
            
            
            
            66
            
            
            
            (15
            )Deferred
      revenue
            
            
            355
            
            
            
            -
            
            
            
            -Payable
      to affiliate
            
            
            76
            
            
            
            (8
            )
            
            
            (149
            )Net
      cash provided by operating activities
            
            
            17,934
            
            
            
            19,407
            
            
            
            16,843Cash
      flows from investing activitiesLoans
      originated
            
            
            (137,635
            )
            
            
            (159,745
            )
            
            
            (169,460
            )Principal
      collected on loans
            
            
            91,134
            
            
            
            107,656
            
            
            
            118,772Unsecured
      loans
            
            
            —
            
            
            
            —
            
            
            
            34Payments
      for development of real estate
            
            
            (2,096
            )
            
            
            (520
            )
            
            
            (939
            )Proceeds
      from disposition of real estate
            
            
            5,886
            
            
            
            635
            
            
            
            1,541Net
      cash used in investing activities
            
            
            (42,711
            )
            
            
            (51,974
            )
            
            
            (50,052
            )Cash
      flows from financing activitiesBorrowings
      (repayments) on line of credit, net
            
            
            (1,250
            )
            
            
            (1,300
            )
            
            
            16,000Contributions
      by partner applicants
            
            
            32,618
            
            
            
            34,862
            
            
            
            39,882Partners’
      withdrawals
            
            
            (12,017
            )
            
            
            (10,030
            )
            
            
            (7,617
            )Syndication
      costs paid
            
            
            (422
            )
            
            
            (445
            )
            
            
            (845
            )Formation
      loan lending
            
            
            (2,444
            )
            
            
            (2,674
            )
            
            
            (2,978
            )Formation
      loan collections
            
            
            1,564
            
            
            
            1,422
            
            
            
            1,178Increase
      to (distribution from) minority interest
            
            
            223
            
            
            
            (25
            )
            
            
            141Net
      cash provided by financing activities
            
            
            18,272
            
            
            
            21,810
            
            
            
            45,761Net
      increase (decrease) in cash and cash equivalents
            
            
            (6,505
            )
            
            
            (10,757
            )
            
            
            12,552Cash
      and cash equivalents - beginning of year
            
            
            18,096
            
            
            
            28,853
            
            
            
            16,301Cash
      and cash equivalents - end of year
            
            $
            11,591
            
            
            $
            18,096
            
            
            $
            28,853Supplemental
      disclosures of cash flow informationCash
      paid for interest
            
            $
            1,873
            
            
            $
            2,344
            
            
            $
            278








The
accompanying notes are an integral part of these consolidated financial
statements.


34


REDWOOD
MORTGAGE INVESTORS VIII


(A
California Limited Partnership)


Notes
to Consolidated Financial Statements


December
31, 2007, 2006 and 2005








1.        Organizational and
General





Redwood
Mortgage Investors VIII, a California Limited Partnership (the “Partnership”),
was organized in 1993.  The general partners are Michael R. Burwell,
an individual, Gymno Corporation and Redwood Mortgage Corp., both California
corporations, whose majority owner is Michael R. Burwell.  The
Partnership was organized to engage in business as a mortgage lender for the
primary purpose of making loans secured by deeds of trust on California real
estate.  Loans are being arranged and serviced by Redwood Mortgage
Corp.  At December 31, 2007, the Partnership was in its sixth offering
stage, wherein contributed capital totaled $279,420,000 of approved aggregate
offerings of $300,000,000.  As of December 31, 2007 and 2006, $492,000
and $557,000, respectively, remained in applicant status, and total Partnership
units sold were in the aggregate of $279,420,000 and $246,850,000,
respectively.





A minimum
of $250,000 and a maximum of $15,000,000 in Partnership units were initially
offered through qualified broker-dealers.  This initial offering
closed in October 1996.  In December 1996, the Partnership commenced a
second offering of an additional $30,000,000 which closed on August 30,
2000.  On August 31, 2000, the Partnership commenced a third offering
for an additional $30,000,000 which closed in April 2002.  On October
30, 2002, the Partnership commenced a fourth offering for an additional
$50,000,000 which closed in October 2003.  On October 7, 2003, the
Partnership commenced a fifth offering for an additional $75,000,000 which
closed in August 2005.  On August 4, 2005, the Partnership commenced a
sixth offering for an additional $100,000,000.





Sales commissions -
formation loans





Sales
commissions are not paid directly by the Partnership out of the offering
proceeds. Instead, the Partnership loans to Redwood Mortgage Corp., one of the
general partners, amounts to pay all sales commissions and amounts payable in
connection with unsolicited orders.  This loan is unsecured and
non-interest bearing and is referred to as the “formation loan.”





The
formation loan relating to the initial offering ($15,000,000) totaled
$1,075,000, which was 7.2% of limited partners’ contributions of
$14,932,000.  It is being repaid, without interest, in ten annual
installments of $107,000, which commenced on January 1, 1997, following the year
the initial offering closed.  Payments on this loan were also made
during the offering period prior to the close of the offering. As of December
31, 2007 this Formation Loan has been fully repaid.





The
formation loan relating to the second offering ($30,000,000) totaled $2,272,000,
which was 7.6% of limited partners’ contributions of $29,993,000.  It
is being repaid, without interest, in ten equal annual installments of $201,000,
which commenced on January 1, 2001, following the year the second offering
closed.  Payments on this loan were also made during the offering
period prior to the close of the offering.





The
formation loan relating to the third offering ($30,000,000) totaled $2,218,000,
which was 7.4% of the limited partners’ contributions of
$29,999,000.  It is being repaid, without interest, in ten annual
installments of $178,000, which commenced on January 1, 2003, following the year
the third offering closed.  Payments on this loan were also made
during the offering stage prior to the close of the offering.





The
formation loan relating to the fourth offering ($50,000,000) totaled $3,777,000,
which was 7.6% of the limited partners contributions of
$49,985,000.  It is being repaid, without interest, in ten annual
installments of $365,000, which commenced on January 1, 2004, following the year
the fourth offering closed.  Payments on this loan were also made
during the offering stage prior to the close of the offering.





35


REDWOOD
MORTGAGE INVESTORS VIII


(A
California Limited Partnership)


Notes
to Consolidated Financial Statements


December
31, 2007, 2006 and 2005










1.        Organizational and General
(continued)







Sales commissions -
formation loans (continued)





The
formation loan relating to the fifth offering ($75,000,000) totaled $5,661,000,
which was 7.6% of the limited partners contributions of
$74,904,000.  It is being repaid, without interest, in ten annual
installments of $526,000, which commenced on January 1, 2006, following the year
the fifth offering closed.  Payments on this loan were also made
during the offering stage prior to the close of the offering.





The
formation loan relating to the sixth offering ($100,000,000) totaled $6,006,000
as of December 31, 2007, which was 7.5% of the limited partners contributions of
$79,607,000 through December 31, 2007.  An equal annual repayment
schedule on this loan, without interest, will commence in the year subsequent to
the closing of this offering.  Payments on this loan are being made
during the offering stage prior to the close of the offering.





For the
offerings, sales commissions paid to brokers range from 0% (units sold by
general partners) to 9% of gross proceeds.  The Partnership
anticipates that the sales commissions will approximate 7.6% based on the
assumption that 65% of investors will elect to reinvest earnings, thus
generating full 9% commissions.  The principal balance of the
formation loan will increase as additional sales of units are
made.  The amount of the annual installment payment to be made by
Redwood Mortgage Corp., during the offering stage, will be determined at annual
installments of one-tenth of the principal balance of the formation loan as of
December 31 of each year.





The
following summarizes formation loan transactions to December 31, 2007 (in
thousands):





Initial
            
            
            Subsequent
            
            
            Third
            
            
            Fourth
            
            
            Fifth
            
            
            SixthOffering
      of
            
            
            Offering
      of
            
            
            Offering
      of
            
            
            Offering
      of
            
            
            Offering
      of
            
            
            Offering
      of$
            15,000
            
            
            $
            30,000
            
            
            $
            30,000
            
            
            $
            50,000
            
            
            $
            75,000
            
            
            $
            100,000
            
            
            TotalLimited
      Partnercontributions
            
            $
            14,932
            
            
            $
            29,993
            
            
            $
            29,999
            
            
            $
            49,985
            
            
            $
            74,904
            
            
            $
            79,607
            
            
            $
            279,420Formation
      Loan made
            
            $
            1,075
            
            
            $
            2,272
            
            
            $
            2,218
            
            
            $
            3,777
            
            
            $
            5,661
            
            
            $
            6,006
            
            
            $
            21,009Unamortized
      discounton
      imputed interest
            
            
            —
            
            
            
            (263
            )
            
            
            (323
            )
            
            
            (691
            )
            
            
            (2,567
            )
            
            
            (2,692
            )
            
            
            (6,536
            )Formation
      Loanmade,
      net
            
            
            1,075
            
            
            
            2,009
            
            
            
            1,895
            
            
            
            3,086
            
            
            
            3,094
            
            
            
            3,314
            
            
            
            14,473Repayments
      to date
            
            
            (991
            )
            
            
            (1,586
            )
            
            
            (1,122
            )
            
            
            (1,538
            )
            
            
            (1,385
            )
            
            
            (441
            )
            
            
            (7,063
            )Early
      withdrawalpenalties
      applied
            
            
            (84
            )
            
            
            (142
            )
            
            
            (107
            )
            
            
            (50
            )
            
            
            (66
            )
            
            
            —
            
            
            
            (449
            )Formation
      Loan, netat
      December 31, 2007
            
            
            —
            
            
            
            281
            
            
            
            666
            
            
            
            1,498
            
            
            
            1,643
            
            
            
            2,873
            
            
            
            6,961Unamortized
      discounton
      imputed interest
            
            
            —
            
            
            
            263
            
            
            
            323
            
            
            
            691
            
            
            
            2,567
            
            
            
            2,692
            
            
            
            6,536Balance,December
      31, 2007
            
            $
            —
            
            
            $
            544
            
            
            $
            989
            
            
            $
            2,189
            
            
            $
            4,210
            
            
            $
            5,565
            
            
            $
            13,497Percent
      loaned
            
            
            7.2
            %
            
            
            7.6
            %
            
            
            7.4
            %
            
            
            7.6
            %
            
            
            7.6
            %
            
            
            7.5
            %
            
            
            7.5
            %





36


REDWOOD
MORTGAGE INVESTORS VIII


(A
California Limited Partnership)


Notes
to Consolidated Financial Statements


December
31, 2007, 2006 and 2005








1.        Organizational and General
(continued)





Sales commissions -
formation loans (continued)





The
formation loan has been deducted from limited partners’ capital in the
consolidated balance sheets.  As amounts are collected from Redwood
Mortgage Corp., the deduction from capital will be reduced.  Interest
has been imputed at the market rate of interest in effect at the date the
offerings closed which ranged from 4.00% to 9.50%.  An estimated
amount of imputed interest is recorded for offerings still
outstanding.  During 2007, 2006 and 2005, $680,000, $500,000 and
$395,000, respectively, was recorded related to amortization of the discount on
imputed interest.





Syndication
costs





The
Partnership bears its own syndication costs, other than certain sales
commissions, including legal and accounting expenses, printing costs, selling
expenses and filing fees.  Syndication costs are charged against
partners’ capital and are being allocated to individual partners consistent with
the partnership agreement.





Through
December 31, 2007, syndication costs of $4,685,000 had been incurred by the
Partnership with the following distribution (in thousands):




Costs
      incurred
            
            $
            4,685Early
      withdrawal penalties applied
            
            
            (146
            )Allocated
      to date
            
            
            (2,730
            )December
      31, 2007 balance
            
            $
            1,809





Syndication
costs attributable to the initial offering ($15,000,000) were limited to the
lesser of 10% of the gross proceeds or $600,000 with any excess being paid by
the general partners.  Applicable gross proceeds were
$14,932,000.  Related expenditures totaled $582,000 ($570,000
syndication costs plus $12,000 organization expense) or 3.9% of
contributions.





Syndication
costs attributable to the second offering ($30,000,000) were limited to the
lesser of 10% of the gross proceeds or $1,200,000 with any excess being paid by
the general partners.  Gross proceeds of the second offering were
$29,993,000.  Syndication costs totaled $598,000 or 2% of
contributions.





Syndication
costs attributable to the third offering ($30,000,000) were limited to the
lesser of 10% of the gross proceeds or $1,200,000 with any excess being paid by
the general partners.  Gross proceeds of the third offering were
$29,999,000.  Syndication costs totaled $643,000 or 2.1% of
contributions.





Syndication
costs attributable to the fourth offering ($50,000,000) were limited to the
lesser of 10% of the gross proceeds or $2,000,000 with any excess to be paid by
the general partners.  Gross proceeds of the fourth offering were
$49,985,000.  Syndication costs totaled $658,000 or 1.3% of
contributions.





Syndication
costs attributable to the fifth offering ($75,000,000) were limited to the
lesser of 10% of the gross proceeds or $3,000,000 with any excess to be paid by
the general partners.  Gross proceeds of the fifth offering were
$74,904,000.  Syndication costs totaled $789,000 or 1.1% of
contributions.





37


REDWOOD
MORTGAGE INVESTORS VIII


(A
California Limited Partnership)


Notes
to Consolidated Financial Statements


December
31, 2007, 2006 and 2005








1.        Organizational and General
(continued)





Syndication costs
(continued)





Syndication
costs attributable to the sixth offering ($100,000,000) will be limited to the
lesser of 10% of the gross proceeds or $4,000,000 with any excess to be paid by
the general partners.  As of December 31, 2007, the sixth offering had
incurred syndication costs of $1,427,000 (1.79% of contributions).





Term of the
partnership





The
Partnership is scheduled to terminate on December 31, 2032, unless sooner
terminated as provided in the partnership agreement.








2.        Summary of Significant
Accounting Policies





Basis of
presentation





The
Partnership’s consolidated financial statements include the accounts of its
100%-owned subsidiaries, Russian Hill Property Company, LLC (“Russian”) and
Borrette Property Company, LLC (“Borrette”), and its 72.50%-owned subsidiary,
Larkin Street Property Company, LLC (“Larkin”).  All significant
intercompany transactions and balances have been eliminated in
consolidation.





Reclassifications





Certain
reclassifications, not affecting previously reported net income or total partner
capital, have been made to the previously issued consolidated financial
statements to conform to the current year presentation.





Management
estimates





The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions about the reported amounts of
assets and liabilities, and disclosures of contingent assets and liabilities, at
the dates of the consolidated financial statements and the reported amounts of
revenues and expenses during the reported periods.  Such estimates
relate principally to the determination of the allowance for loan losses,
including the valuation of impaired loans and the valuation of real estate
owned.  Actual results could differ significantly from these
estimates.





Loans, secured by deeds of
trust





Loans
generally are stated at their outstanding unpaid principal balance with interest
thereon being accrued as earned.





If the
probable ultimate recovery of the carrying amount of a loan, with due
consideration for the fair value of collateral, is less than amounts due
according to the contractual terms of the loan agreement, and the shortfall in
the amounts due are not insignificant, the carrying amount of the loan is
reduced to the present value of future cash flows discounted at the loan’s
effective interest rate.  If a loan is collateral dependent, it is
valued at the estimated fair value of the related collateral.





38


REDWOOD
MORTGAGE INVESTORS VIII


(A
California Limited Partnership)


Notes
to Consolidated Financial Statements


December
31, 2007, 2006 and 2005








2.        Summary of Significant
Accounting Policies (continued)





Loans, secured by deeds of
trust (continued)





If events
and or changes in circumstances cause management to have serious doubts about
the collectibility of the contractual payments, a loan may be categorized as
impaired and interest is no longer accrued.  Any subsequent payments
on impaired loans are applied to reduce the outstanding loan balances, including
accrued interest and advances.  At December 31, 2007 and 2006, there
were no loans categorized as impaired by the Partnership.  The average
recorded investment in impaired loans was $0 for 2007, 2006 and
2005.





At
December 31, 2007 and 2006, the Partnership had 21 and 10 loans 90 days past
maturity and/or past due 90 days or more in interest payments, totaling
$65,852,000 and $30,055,000, respectively.  In addition, accrued
interest, late charges and advances on these loans totaled $5,095,000 and
$1,568,000 at December 31, 2007 and 2006, respectively.  The
Partnership does not consider these loans to be impaired because there is
sufficient collateral to cover the amount outstanding to the Partnership and is
still accruing interest on these loans.  As presented in Note 10 to
the consolidated financial statements, the average loan to appraised value of
security based upon appraised values and prior indebtedness at the time the
loans were consummated for loans outstanding at December 31, 2007 and 2006 was
67.29% and 65.95% respectively.  When loans are considered impaired
the allowance for loan losses is updated to reflect the change in the valuation
of collateral security.  However, a low loan to value ratio has the
tendency to minimize reductions for impairment.





Allowance for loan
losses





Loans and
the related accrued interest, late fees and advances are analyzed on a periodic
basis for recoverability.  Delinquencies are identified and followed
as part of the loan system.  Delinquencies are determined based upon
contractual terms.  A provision is made for loan losses to adjust the
allowance for loan losses to an amount considered by management to be adequate,
with due consideration to collateral values, to provide for unrecoverable loans
and receivables, including impaired loans, other loans, accrued interest, late
fees and advances on loans and other accounts receivable.  The
Partnership charges off uncollectible loans and related receivables directly to
the allowance account once it is determined that the full amount is not
collectible.





39


REDWOOD
MORTGAGE INVESTORS VIII


(A
California Limited Partnership)


Notes
to Consolidated Financial Statements


December
31, 2007, 2006 and 2005








2.         Summary of Significant
Accounting Policies (continued)





Allowance for loan losses
(continued)





The
composition of the allowance for loan losses was as follows (in
thousands):





December
      31,2007
            
            2006
            
            2005Amount
            
            Percent
      of loans in each category to total loans
            
            Amount
            
            Percent
      of loans in each category to total loans
            
            Amount
            
            Percent
      of loans in each category to total loansBalance
      at End of YearApplicable
      to:DomesticReal
      estate –mortgageSingle
      family(1-4
      units)
            $      3,028
            
            62.71%
            
            $      1,673
            
            73.10%
            
            $      1,598
            
            54.64%Apartments
            158
            
            3.07%
            
            160
            
            5.71%
            
            145
            
            8.98%Commercial
            1,210
            
            33.03%
            
            887
            
            20.40%
            
            1,140
            
            30.45%Land
            73
            
            1.20%
            
            66
            
            0.79%
            
            255
            
            5.93%Total
      real estate-mortgage
            4,387
            
            100.00%
            
            2,786
            
            100.00%
            
            3,138
            
            100.00%Unsecured
            82
            
            100.00%Total
            $      4,469
            
            100.00%
            
            $      2,786
            
            100.00%
            
            $      3,138
            
            100.00%





40


REDWOOD
MORTGAGE INVESTORS VIII


(A
California Limited Partnership)


Notes
to Consolidated Financial Statements


December
31, 2007, 2006 and 2005








2.          Summary of Significant
Accounting Policies (continued)





Allowance for loan losses
(continued)





Activity
in the allowance for loan losses is as follows (in thousands):





Years
      Ended December 31,





2007
            
            
            
            2006
            
            
            
            2005Balance
      at beginning of year
            
            $
            2,786
            
            
            $
            3,138
            
            
            $
            2,343Charge-offsDomesticReal
      estate - mortgageSingle
      family (1-4 units)
            
            
            (13
            )
            
            
            (112
            )
            
            
            (26
            )Apartments
            
            
            (11
            )
            
            
            —
            
            
            
            —Commercial
            
            
            (363
            )
            
            
            (15
            )
            
            
            (34
            )Land
            
            
            (46
            )
            
            
            —
            
            
            
            —(433
            )
            
            
            (127
            )
            
            
            (60
            )RecoveriesDomesticReal
      estate - mortgageSingle
      family (1-4 units)
            
            
            —
            
            
            
            —
            
            
            
            —Apartments
            
            
            —
            
            
            
            —
            
            
            
            —Commercial
            
            
            —
            
            
            
            —
            
            
            
            —Land
            
            
            —
            
            
            
            —
            
            
            
            ——
            
            
            
            —
            
            
            
            —Net
      charge-offs
            
            
            (433
            )
            
            
            (127
            )
            
            
            (60
            )Additions
      charge to operations
            
            
            1,788
            
            
            
            927
            
            
            
            855Transfer
      from (to) real estate owned reserve
            
            
            328
            
            
            
            (1,152
            )
            
            
            —Balance
      at end of year
            
            $
            4,469
            
            
            $
            2,786
            
            
            $
            3,138Ratio
      of net charge-offs duringthe
      period to average secured loansoutstanding
      during the period
            
            
            0.14
            %
            
            
            0.05
            %
            
            
            0.03
            %








41


REDWOOD
MORTGAGE INVESTORS VIII


(A
California Limited Partnership)


Notes
to Consolidated Financial Statements


December
31, 2007, 2006 and 2005








2.        Summary of Significant
Accounting Policies (continued)





Cash and cash
equivalents





The
Partnership considers all highly liquid financial instruments with maturities of
three months or less at the time of purchase to be cash
equivalents.  Periodically, the Partnership cash balances exceed
federally insured limits.





Real estate
owned





Real
estate owned includes real estate acquired through foreclosure and is stated at
the lower of the recorded investment in the loan, plus any senior indebtedness,
or at the property’s estimated fair value, less estimated costs to sell, as
applicable.  Costs relating to the development and improvement of real
estate owned are capitalized, whereas costs relating to holding the property are
expensed





The
Partnership periodically compares the carrying value of real estate to expected
undiscounted future cash flows for the purpose of assessing the recoverability
of the recorded amounts.  If the carrying value exceeds future
undiscounted cash flows, the assets are reduced to estimated fair
value.  During 2007, the Partnership transferred $328,000 to the
allowance for loan losses from the allowance for real estate owned.





Loan origination
fees





The
Partnership capitalizes fees for obtaining bank financing.  The fees
are amortized over the life of the financing using the straight-line
method.





Income
taxes





No
provision for federal and state income taxes (other than an $800 state minimum
tax) is made in the consolidated financial statements since income taxes are the
obligation of the partners if and when income taxes apply.





Net income per $1,000
invested





Amounts
reflected in the statements of income as net income per $1,000 invested by
limited partners for the entire period are amounts allocated to limited partners
who held their investment throughout the period and have elected to either leave
their earnings to compound or have elected to receive periodic distributions of
their net income.  Individual income is allocated each month based on
the limited partners’ pro rata share of partners’ capital.  Because
the net income percentage varies from month to month, amounts per $1,000 will
vary for those individuals who made or withdrew investments during the period,
or selected other options.








42


REDWOOD
MORTGAGE INVESTORS VIII


(A
California Limited Partnership)


Notes
to Consolidated Financial Statements


December
31, 2007, 2006 and 2005








2.         Summary of Significant
Accounting Policies (continued)





Late fee
revenue





Late fees
are generally charged at 6% of the monthly installment payment past
due.  During 2007, 2006 and 2005, late fee revenue of $257,000,
$241,000 and $120,000, respectively, was recorded.  The Partnership
has a recorded late fee receivable at December 31, 2007 and 2006 of $186,000 and
$92,000, respectively.





Recently issued accounting
pronouncements





In March
2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial
Assets, an amendment of FASB Statement No. 140” (SFAS 156), which permits,
but does not require, an entity to account for one or more classes of servicing
rights (i.e., mortgage servicing rights) at fair value, with the changes in fair
value recorded in the statement of income. SFAS 156 is effective in the first
quarter of 2007.  The adoption of SFAS 156 is not expected to have a
material impact on the Partnership’s financial condition and results of
operations.







On
September 15, 2006, the FASB issued SFAS No. 157, “Fair Value
Measurements” (SFAS 157). SFAS 157 defines fair value, establishes a framework
for measuring fair value under GAAP and enhances disclosures about fair value
measurements.  SFAS 157 defines fair value as the exchange price that
would be received for an asset or paid to transfer a liability (an exit price)
in the principal or most advantageous market for the asset or liability in an
orderly transaction between market participants on the measurement
date.  SFAS 157 is effective for the Partnership’s financial
statements issued for the year beginning on January 1, 2008, with earlier
adoption permitted.  Management is currently evaluating the impact and
timing of the adoption of SFAS 157 on the Partnership’s financial condition and
results of operations.






On
February 15, 2007, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 159, “The Fair Value
Option for Financial Assets and Financial Liabilities” (SFAS 159), which allows
an entity the irrevocable option to elect fair value for the initial and
subsequent measurement for certain financial assets and liabilities on a
contract-by-contract basis.  Subsequent changes in fair value of these
financial assets and liabilities would be recognized in earnings when they
occur.  SFAS 159 further establishes certain additional disclosure
requirements.  SFAS 159 is effective for the Partnership’s financial
statements for the year beginning on January 1, 2008, with earlier adoption
permitted.  Management is currently evaluating the impact and timing
of the adoption of SFAS 159 on the Partnership’s financial condition and results
of operations.






In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51” (SFAS
160).  SFAS 160’s objective is to improve the relevance,
comparability, and transparency of the financial information a reporting entity
provides in its consolidated financial statements by establishing accounting and
reporting standards for the noncontrolling interest in a
subsidiary.  SFAS 160 is effective for fiscal years beginning on or
after December 15, 2008, along with the interim periods within those fiscal
years.  Early adoption is prohibited.  Management is
currently evaluating the impact and timing of the adoption of SFAS 160 on the
Partnership’s financial condition.






On
July 13, 2006, the FASB released FASB Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement
No. 109” (FIN 48). FIN 48 clarifies the accounting and reporting for income
taxes where interpretation of the tax law may be uncertain. FIN 48 prescribes a
comprehensive model for the financial statement recognition, measurement,
presentation and disclosure of income tax uncertainties with respect to
positions taken or expected to be taken in income tax returns.  The
Partnership adopted FIN 48 in the first quarter of 2007. The adoption of FIN 48
did not have a material impact on the Partnership’s financial condition and
results of operations.











43


REDWOOD
MORTGAGE INVESTORS VIII


(A
California Limited Partnership)


Notes
to Consolidated Financial Statements


December
31, 2007, 2006 and 2005








2.         Summary of Significant
Accounting Policies (continued)





Recently issued accounting
pronouncements (continued)





On
September 13, 2006, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin (SAB) No. 108 “Considering the Effects of Prior
Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements” (SAB 108). SAB 108 expresses the SEC Staff’s views regarding the
process of quantifying financial statement misstatements. SAB 108 states that in
evaluating the materiality of financial statement misstatements, an entity must
quantify the impact of correcting misstatements, including both the carryover
and reversing effects of prior year misstatements, on the current year financial
statements. SAB 108 was effective for the year ended December 31,
2006.  The application of SAB 108 did not have an impact on the
Partnership’s financial condition and results of operations.








3.
            Other Partnership
      Provisions





The
Partnership is a California limited partnership.  The rights, duties
and powers of the general and limited partners of the Partnership are governed
by the limited partnership agreement and Sections 15611 et seq. of the
California Corporations Code.





The
general partners are in complete control of the Partnership business, subject to
the voting rights of the limited partners on specified matters.  Any
one of the general partners acting alone has the power and authority to act for
and bind the Partnership.





A
majority of the outstanding limited partnership interests may, without the
permission of the general partners, vote to: (i) terminate the Partnership, (ii)
amend the limited partnership agreement, (iii) approve or disapprove the sale of
all or substantially all of the assets of the Partnership and (iv) remove or
replace one or all of the general partners.





The
approval of all the limited partners is required to elect a new general partner
to continue the Partnership business where there is no remaining general partner
after a general partner ceases to be a general partner other than by
removal.





Applicant
      status





Subscription
      funds received from purchasers of Partnership units are not admitted to
      the Partnership until subscription funds are required to fund a loan, fund
      the formation loan, create appropriate cash reserves, or to pay
      organizational expenses or other proper partnership
      purposes.  During the period prior to the time of admission,
      which is anticipated to be between 1 - 90 days, purchasers’ subscriptions
      will remain irrevocable and will earn interest at money market rates,
      which are lower than the anticipated return on the Partnership’s loan
      portfolio.





During
2007, 2006 and 2005, interest totaling $28,000, $21,000 and $41,000,
respectively, was credited to partners in applicant status.  As loans
were made and partners were transferred to regular status to begin sharing in
Partnership operating income, the interest credited was either paid to the
investors or transferred to partners’ capital along with the original
investment.





Election to receive monthly,
quarterly or annual distributions





At
subscription, investors elect to receive monthly, quarterly or annual
distributions of earnings allocations, or to allow earnings to
compound.  Subject to certain limitations, a compounding investor may
subsequently change his election, but an investor’s election to have cash
distributions is irrevocable.





44


REDWOOD
MORTGAGE INVESTORS VIII


(A
California Limited Partnership)


Notes
to Consolidated Financial Statements


December
31, 2007, 2006 and 2005








3.
            Other Partnership
      Provisions (continued)





Profits and
losses





Profits
and losses are allocated among the limited partners according to their
respective capital accounts monthly after 1% of the profits and losses are
allocated to the general partners.





Liquidity, capital
withdrawals and early withdrawals





There are
substantial restrictions on transferability of Partnership units and accordingly
an investment in the Partnership is non-liquid.  Limited partners have
no right to withdraw from the Partnership or to obtain the return of their
capital account for at least one year from the date of purchase of
units.





In order
to provide a certain degree of liquidity to the limited partners after the
one-year period, limited partners may withdraw all or part of their capital
accounts from the Partnership in four quarterly installments beginning on the
last day of the calendar quarter following the quarter in which the notice of
withdrawal is given, subject to a 10% early withdrawal penalty.  The
10% penalty is applicable to the amount withdrawn as stated in the notice of
withdrawal and will be deducted from the capital account.





After
five years from the date of purchase of the units, limited partners have the
right to withdraw from the Partnership on an installment
basis.  Generally this is done over a five-year period in twenty
quarterly installments.  Once a limited partner has been in the
Partnership for the minimum five-year period, no penalty will be imposed if
withdrawal is made in twenty quarterly installments or
longer.  Notwithstanding the five-year (or longer) withdrawal period,
the general partners may liquidate all or part of a limited partner’s capital
account in four quarterly installments beginning on the last day of the calendar
quarter following the quarter in which the notice of withdrawal is
given.  This withdrawal is subject to a 10% early withdrawal penalty
applicable to any sums withdrawn prior to the time when such sums could have
been withdrawn without penalty.





The
Partnership will not establish a reserve from which to fund withdrawals and,
accordingly, the Partnership’s capacity to return a limited partner’s capital is
restricted to the availability of Partnership cash flow.  Furthermore,
no more than 20% of the total limited partners’ capital accounts outstanding at
the beginning of any year, shall be liquidated during any calendar
year.





4.
            General Partners and
      Related Parties





The
following are commissions and/or fees that are paid to the general
partners:





Mortgage brokerage
commissions





For fees
in connection with the review, selection, evaluation, negotiation and extension
of loans, the general partners may collect an amount equivalent to 12% of the
loaned amount until 6 months after the termination date of the
offering.  Thereafter, loan brokerage commissions (points) will be
limited to an amount not to exceed 4% of the total Partnership assets per
year.  The loan brokerage commissions are paid by the borrowers and
thus, are not an expense of the Partnership.  In 2007, 2006 and 2005,
loan brokerage commissions paid by the borrowers were $2,932,000, $3,496,000,
and $3,697,000, respectively.





45


REDWOOD
MORTGAGE INVESTORS VIII


(A
California Limited Partnership)


Notes
to Consolidated Financial Statements


December
31, 2007, 2006 and 2005








4.
            General Partners and
      Related Parties (continued)





Mortgage servicing
fees





Monthly
mortgage servicing fees of up to 1/8 of 1% (1.5% annual) of the unpaid principal
are paid to Redwood Mortgage Corp., based on the unpaid principal balance of the
loan portfolio, or such lesser amount as is reasonable and customary in the
geographic area where the property securing the mortgage is
located.  Once a loan is categorized as impaired, mortgage servicing
fees are no longer accrued thereon.  Additional service fees are
recorded upon the receipt of any subsequent payments on impaired
loans.  Mortgage servicing fees of $1,449,000, $2,479,000 and
$1,736,000 were incurred for 2007, 2006 and 2005, respectively.  The
Partnership had a payable to Redwood Mortgage Corp. for servicing fees of
$557,000 and $481,000 at December 31, 2007 and 2006, respectively.





Asset management
fee





The
general partners receive monthly fees for managing the Partnership’s loan
portfolio and operations up to 1/32 of 1% of the “net asset value” (3/8 of 1%
annual).  Asset management fees of $1,143,000, $991,000 and $814,000
were incurred for 2007, 2006 and 2005, respectively.





Other
fees





The
Partnership Agreement provides for other fees such as reconveyance, mortgage
assumption and mortgage extension fees. Such fees are incurred by the borrowers
and are paid to the general partners.





Operating
expenses





The
Partnership receives certain operating and administrative services from Redwood
Mortgage Corp., a general partner.  Redwood Mortgage Corp. may be
reimbursed by the Partnership for operating expenses incurred on behalf of the
Partnership, including without limitation, out-of-pocket general and
administration expenses of the Partnership, accounting and audit fees, legal
fees and expenses, postage and preparation of reports to limited
partners.  During 2007, 2006 and 2005, operating expenses totaling
$333,000, $329,000 and $298,000, respectively, were reimbursed to Redwood
Mortgage Corp.  To the extent that some operating and administrative
services were not reimbursed, the financial position and results of Partnership
operation may be different.





Contributed
capital





The
general partners jointly or severally are to contribute 1/10 of 1% of limited
partners’ contributions in cash contributions as proceeds from the offerings are
received from the limited partners.  As of December 31, 2007 and 2006,
Gymno Corporation, a general partner, had capital in accordance with Section
4.02(a) of the Partnership Agreement.


46


REDWOOD
      MORTGAGE INVESTORS VIII


(A
California Limited Partnership)


Notes
to Consolidated Financial Statements


December
31, 2007, 2006 and 2005








5.
            Real Estate
      Owned





Real Estate
Held





Periodically,
management reviews the status of the owned properties to evaluate among other
things, their asset classification.  Properties are purchased or
acquired through foreclosure.  Several factors are considered in
determining the classification of real estate held or real estate held for
sale.  These factors include, but are not limited to, real estate
market conditions, status of any required permits, repair, improvement or
development work to be completed, rental and lease income and investment
potential.  Real estate owned is classified as held for sale in the
period in which the criteria of SFAS 144 are met.  As a property’s
status changes, reclassifications may occur.





The
following schedule for real estate held, reflects the cost of the properties and
recorded reductions to estimated fair values, at December 31 (in
thousands):




2007
            
            
            
            2006Real
      estate heldCosts
      of properties
            
            $
            20,547
            
            
            $
            16,961Reduction
      in value
            
            
            (917
            )
            
            
            (929
            )Real
      estate held , net
            
            $
            19,630
            
            
            $
            16,032





During
the first quarter of 2007, the partnership acquired a single family residence
through foreclosure.  This resulted in an increase in asset value of
real estate held of $2,640,000, an increase in notes payable of $844,000 and a
decrease of $1,320,000 in loans receivable, $399,000 in accrued interest,
$52,000 in advances and $25,000 in late charge receivables.  As of
December 31, 2007 the partnership’s investment in this property totaled
$2,679,000.





In
December 2004, the Partnership acquired land through a deed in lieu of
foreclosure.  At this date the Partnership’s investment totaled
$4,377,000 including accrued interest and advances.  During 2006,
management established a $490,000 reserve against this property to reduce the
carrying amount to management’s estimate of the ultimate net realizable value of
the property.  One parcel during 2006 was sold.  The
Partnership incurred a loss on this sale of $73,000, which had been previously
reserved for.  At December 31, 2007 and 2006, the Partnership’s total
investment in this property was $3,222,000, net of a remaining reserve of
$417,000.





In
September 2004, the Partnership acquired a single family residence through a
foreclosure sale.  At the time the Partnership took ownership of the
property, the Partnership’s investment totaled $1,937,000 including accrued
interest and advances.  The borrower had begun a substantial
renovation of the property, which was not completed at the time of
foreclosure.  The Partnership has decided to pursue development of the
property by processing plans for the creation of two condominium units on the
property.  These plans will incorporate the majority of the existing
improvements currently located on the property.  At December 31, 2007
and 2006, the Partnership’s total investment in this property was $1,857,000 and
$1,759,000, net of a valuation allowance of $500,000.








47


REDWOOD
MORTGAGE INVESTORS VIII


(A
California Limited Partnership)


Notes
to Consolidated Financial Statements


December
31, 2007, 2006 and 2005








5.
            Real Estate Owned
      (continued)





During
2005, the Partnership acquired a multi-unit property through
foreclosure.  At the time the Partnership took ownership of the
property, the Partnership’s investment, together with three other affiliate
partnerships, totaled $10,595,000, including accrued interest and
advances.  Upon acquisition, the property was transferred via a
statutory warranty deed to a new entity named Larkin Street Property Company,
LLC (“Larkin”).  The Partnership owns a 72.50% interest in Larkin and
the other three affiliates collectively own the remaining 27.50%.  No
valuation allowance has been established against this property as management is
of the opinion that the property will have adequate equity to recover all
partnerships’ investments.  The assets, liabilities and any
development or sales expenses of Larkin have been consolidated into the
accompanying consolidated financial statements of the Partnership.  As
of December 31, 2007, approximately $1,708,000 in costs related to the
development of this property have been capitalized.  During 2006, the
Partnership recovered $431,000 from one of the guarantors of the original
loan.  As of December 31, 2007, the Partnership’s investment, together
with the other affiliated partnerships, totaled $11,872,000.





Real Estate Held for
Sale





The
following schedule for real estate held for sale, reflects the cost of the
properties and recorded reductions to estimated fair values, including estimated
costs to sell, at December 31 (in thousands):





2007
            
            
            
            2006Real
      estate held for saleCosts
      of properties
            
            $
            4,479
            
            
            $
            10,618Reduction
      in value
            
            
            (500
            )
            
            
            (1,419
            )Real
      estate held for sale, net
            
            $
            3,979
            
            
            $
            9,199





During
2006, the partnership acquired a single-family residence through
foreclosure.  At the time the partnership took ownership of the
property, the partnership’s investment totaled $6,028,000.  As of June
30, 2007 and December 31, 2006, approximately $253,000 and $111,000,
respectively, in costs related to the development of this property had been
capitalized.  In June, 2007, the property was sold at a loss of
$602,000, which was offset against a valuation allowance of $919,000, which was
allocated for this property.





During
2002, a single-family residence that secured a Partnership loan totaling
$4,402,000, including accrued interest and advances, was transferred via a
statutory warranty deed to a new entity named Russian Hill Property Company, LLC
(“Russian”).  Russian was formed by the Partnership to complete the
development and sale of the property.  The assets, liabilities and any
development or sales expenses of Russian have been consolidated into the
accompanying consolidated financial statements of the
Partnership.  Costs related to the sale and development of this
property were capitalized during 2003.  Commencing January 2004, costs
related to sales and maintenance of the property were being
expensed.  At December 31, 2007 and 2006, the Partnership’s total
investment in Russian was $3,979,000, net of a valuation allowance of
$500,000.  The property is classified as held for sale as we expect to
sell the property during 2008.








48


REDWOOD
MORTGAGE INVESTORS VIII


(A
California Limited Partnership)


Notes
to Consolidated Financial Statements


December
31, 2007, 2006 and 2005








6.
            Income
      Taxes





The
following reflects a reconciliation of partners’ capital reflected in the
consolidated financial statements to the tax basis of Partnership capital (in
thousands):




2007
            
            
            
            2006Partners’
      capital per consolidatedfinancial
      statements
            
            $
            311,327
            
            
            $
            270,391Unallocated
      syndication costs
            
            
            1,809
            
            
            
            1,761Allowance
      for loan losses andreal
      estate owned
            
            
            5,886
            
            
            
            5,134Formation
      loans receivable
            
            
            13,497
            
            
            
            12,693Partners’
      capital - tax basis
            
            $
            332,519
            
            
            $
            289,979





In 2007
and 2006, approximately 49% and 44%, respectively, of taxable income was
allocated to tax-exempt organizations (i.e., retirement plans).








7.        Bank Line of
Credit





The
Partnership has a bank line of credit in the maximum amount of the lesser of (1)
$75,000,000, (2) one-third of partners’ capital, or (3) the borrowing base as
defined in the agreement.  The line of credit matures on November 15,
2008, with borrowings at prime less 0.50% and secured by the Partnership’s loan
portfolio.  The outstanding balances were $29,450,000 and $30,700,000
at December 31, 2007 and 2006, respectively.  The interest rate was
6.75% at December 31, 2007 and 7.75% at December 31, 2006.  The
Partnership may also be subject to a 0.5% fee on specified balances in the event
the line is not utilized.  The line of credit requires the Partnership
to comply with certain financial covenants.  The Partnership was in
compliance with these covenants at December 31, 2007 and 2006.  There
is an option to convert the line of credit to a term loan that would be payable
over 36 months.








8.
            Fair Value of
      Financial Instruments





The
following methods and assumptions were used to estimate the fair value of
financial instruments:





(a)
            Cash
      and cash equivalents.  The carrying amount equals fair
      value.  All amounts, including interest bearing, are subject to
      immediate withdrawal.





(b)
            Secured
      loans carrying value was $305,568,000 and $261,097,000 at December 31,
      2007 and 2006, respectively.  The fair value of these loans of
      $307,654,000 and $261,692,000, respectively, was estimated based upon
      projected cash flows discounted at the estimated current interest rates at
      which similar loans would be made.  The applicable amount of the
      allowance for loan losses along with accrued interest and advances related
      thereto should also be considered in evaluating the fair value versus the
      carrying value.





(c)
            Line
      of credit and loan commitments.  The carrying amount equals fair
      value.  All amounts, including interest payable, are subject to
      immediate repayment.





49


REDWOOD
MORTGAGE INVESTORS VIII


(A
California Limited Partnership)


Notes
to Consolidated Financial Statements


December
31, 2007, 2006 and 2005








9.
            Non-Cash
      Transactions





During
the first quarter of 2007, the partnership acquired a single family residence
through foreclosure.  This resulted in an increase in asset value of
real estate held of $2,640,000, an increase in notes payable of $844,000 and a
decrease of $1,320,000 in loans receivable, $399,000 in accrued interest,
$52,000 in advances and $25,000 in late charge receivables.





During
2006, a previous real estate owned property was sold with the Partnership
providing financing.  This resulted in a decrease to real estate owned
of $588,000 and an increase to secured loans of $588,000.





During
2006, the Partnership foreclosed on one property (see Note 5), which resulted in
an increase in real estate owned of $6,028,000, and a decrease in secured loans
receivable, accrued interest and advances of $5,464,000, $448,000 and $116,000,
respectively.





During
2005, the Partnership foreclosed on, or acquired property through deed in lieu
of foreclosure, two properties (see Note 5), which resulted in an increase in
real estate owned and minority interest of $11,954,000 and $2,901,000,
respectively, and a decrease in secured loans receivable, accrued interest and
advances of $8,361,000, $601,000 and $91,000, respectively.





During
2004, the Partnership foreclosed on, or acquired property through deeds in lieu
of foreclosure, four properties (see Note 5), which resulted in an increase in
real estate owned and allowance for real estate owned of $6,315,000 and
$500,000, respectively and a decrease in secured loans receivable, accrued
interest, advances, and allowance for loan losses of $4,422,000, $1,840,000,
$53,000 and $500,000, respectively.








50


REDWOOD
MORTGAGE INVESTORS VIII


(A
California Limited Partnership)


Notes
to Consolidated Financial Statements


December
31, 2007, 2006 and 2005








10.
            Loan Concentrations
      and Characteristics





Most
      loans are secured by recorded deeds of trust. At December 31, 2007 and
      2006, there were 116 and 105 secured loans outstanding, respectively, with
      the following characteristics (dollars in
  thousands):




2007
            
            
            
            2006Number
      of secured loans outstanding
            
            
            116
            
            
            
            105Total
      secured loans outstanding
            
            $
            305,568
            
            
            $
            261,097Average
      secured loan outstanding
            
            $
            2,634
            
            
            $
            2,487Average
      secured loan as percent of totalsecured
      loans
            
            
            0.86
            %
            
            
            0.95
            %Average
      secured loan as percentof
      partners’ capital
            
            
            0.85
            %
            
            
            0.92
            %Largest
      secured loan outstanding
            
            $
            34,383
            
            
            $
            32,156Largest
      secured loan as percent of totalsecured
      loans
            
            
            11.25
            %
            
            
            12.32
            %Largest
      secured loan as percentof
      partners’ capital
            
            
            11.04
            %
            
            
            11.89
            %Largest
      secured loan as percent of total assets
            
            
            9.95
            %
            
            
            10.54
            %Number
      of counties where securityis
      located (all California)
            
            
            32
            
            
            
            24Largest
      percentage of secured loansin
      one county
            
            
            23.63
            %
            
            
            25.36
            %Number
      of secured loans in foreclosure status
            
            
            5
            
            
            
            2Amount
      of secured loans in foreclosure
            
            $
            5,169
            
            
            $
            2,108











51





REDWOOD
MORTGAGE INVESTORS VIII


(A
California Limited Partnership)


Notes
to Consolidated Financial Statements


December
31, 2007, 2006 and 2005








10.
            Asset Concentrations
      and Characteristics
(continued)





The
following secured loan categories were held at December 31, 2007 and 2006 (in
thousands):




2007
            
            
            
            2006First
      trust deeds
            
            $
            138,965
            
            
            $
            125,061Second
      trust deeds
            
            
            166,103
            
            
            
            133,623Third
      trust deeds
            
            
            500
            
            
            
            2,413Total
      loans
            
            
            305,568
            
            
            
            261,097Prior
      liens due other lenders at time of loan
            
            
            433,797
            
            
            
            329,554Total
      debt
            
            $
            739,365
            
            
            $
            590,651Appraised
      property value at time of loan
            
            $
            1,098,743
            
            
            $
            895,621Average
      secured loan to appraised valueof
      security based on appraised values andprior
      liens at time loan was consummated
            
            
            67.29
            %
            
            
            65.95
            %Secured
      loans by type of propertySingle
      family (1-4 units)
            
            $
            191,608
            
            
            $
            190,859Apartments
            
            
            9,369
            
            
            
            14,914Commercial
            
            
            100,933
            
            
            
            53,262Land
            
            
            3,658
            
            
            
            2,062$
            305,568
            
            
            $
            261,097





The
interest rates on the loans range from 7.0% to 13.0% at December 31, 2007 and
7.0% to 13.0% at December 31, 2006.





Scheduled
maturity dates of secured loans as of December 31, 2007 are as follows (in
thousands):




Year
      Ending December 31,2008
            
            $
            186,7152009
            
            
            61,3842010
            
            
            36,7132011
            
            
            6,9352012
            
            
            12,049Thereafter
            
            
            1,772$
            305,568





52


REDWOOD
MORTGAGE INVESTORS VIII


(A
California Limited Partnership)


Notes
to Consolidated Financial Statements


December
31, 2007, 2006 and 2005








10.
            Loan Concentrations
      and Characteristics
(continued)





The
scheduled maturities for 2008 include seven loans totaling $35,472,000, and
representing 11.61% of the portfolio, which are past maturity at December 31,
2007.  Interest payments on five of these loans were delinquent and
are included in the total of loans 90 days or more delinquent presented in Note
2.  Occasionally, the Partnership allows borrowers to continue to make
the payments on debt past maturity for periods of time.  It is the
partnership’s experience that loans are sometimes refinanced or repaid before
the maturity date.  Therefore, the above tabulation for scheduled
maturities is not a forecast of future cash receipts.





The
Partnership had 11% of its receivable balance due from one borrower at December
31, 2007.  Interest revenue for this borrower accounted for
approximately 11.16% of interest revenue for the year ended December 31,
2007.








11.
            Commitments and
      Contingencies





Construction /
      rehabilitation loans





The
Partnership makes construction and rehabilitation loans which are not fully
disbursed at loan inception.  The Partnership has approved the
borrowers up to a maximum loan balance; however, disbursements are made
periodically during completion phases of the construction or rehabilitation or
at such other times as required under the loan documents.  At December
31, 2007, there were $6,997,000 of undisbursed loan funds which will be funded
by a combination of borrower monthly mortgage payments, line of credit draws,
retirements of principal on current loans, cash and capital contributions from
investors.  The Partnership does not maintain a separate cash reserve
to hold the undisbursed obligations, which are intended to be
funded.





Workout
agreements





The
Partnership periodically negotiates various workout agreements with borrowers
whose loans are past maturity or who are delinquent in making
payments.  The Partnership is not obligated to fund additional money
as of December 31, 2007.  As of December 31, 2007, there are three
loans under workout agreements totaling $368,000.





Legal
proceedings





The
Partnership is involved in various legal actions arising in the normal course of
business. In the opinion of management, such matters will not have a material
effect upon the financial position of the Partnership.








53


REDWOOD
MORTGAGE INVESTORS VIII


(A
California Limited Partnership)


Notes
to Consolidated Financial Statements


December
31, 2007, 2006 and 2005








12.
            Selected Financial
      Information (Unaudited)





Calendar
      Quarter(in
      thousands, except for per limited partner
  amounts)





First
            
            
            Second
            
            
            Third
            
            
            Fourth
            
            
            AnnualRevenues2007
            
            $
            7,098
            
            
            $
            7,200
            
            
            $
            7,620
            
            
            $
            7,699
            
            
            $
            29,6172006
            
            $
            6,659
            
            
            $
            6,997
            
            
            $
            6,847
            
            
            $
            6,822
            
            
            $
            27,325Expenses2007
            
            $
            1,958
            
            
            $
            1,880
            
            
            $
            2,068
            
            
            $
            2,139
            
            
            $
            8,0452006
            
            $
            2,247
            
            
            $
            2,371
            
            
            $
            2,017
            
            
            $
            1,818
            
            
            $
            8,453Net
      income allocatedto
      general partners2007
            
            $
            51
            
            
            $
            54
            
            
            $
            55
            
            
            $
            56
            
            
            $
            2162006
            
            $
            44
            
            
            $
            46
            
            
            $
            48
            
            
            $
            50
            
            
            $
            188Net
      income allocatedto
      limited partners2007
            
            $
            5,089
            
            
            $
            5,266
            
            
            $
            5,497
            
            
            $
            5,504
            
            
            $
            21,3562006
            
            $
            4,368
            
            
            $
            4,580
            
            
            $
            4,782
            
            
            $
            4,954
            
            
            $
            18,684Net
      income per $1,000invested
      where income isCompounded2007
            
            $
            17
            
            
            $
            18
            
            
            $
            18
            
            
            $
            18
            
            
            $
            712006
            
            $
            17
            
            
            $
            17
            
            
            $
            17
            
            
            $
            20
            
            
            $
            71Withdrawn2007
            
            $
            17
            
            
            $
            17
            
            
            $
            17
            
            
            $
            18
            
            
            $
            692006
            
            $
            17
            
            
            $
            17
            
            
            $
            17
            
            
            $
            18
            
            
            $
            69








13.        Subsequent
Events





Subsequent
to December 31, 2007 and through March 24, 2008, the Partnership has received
$6,365,000 of new investor money for the current offering and had admitted
$6,610,000 of partners in applicant status into the Partnership.  The
admitted amount includes $492,000 that awaited admission at December 31,
2007.





54


REDWOOD
MORTGAGE INVESTORS VIII


(A
California Limited Partnership)


Schedule
II – Valuation and Qualifying Accounts


For
the Years Ended December 31, 2007, 2006 and 2005


(in
thousands)





B
            
            CBalance
      at
            
            Additions
            
            
            
            EBeginning
            
            Charged
      to
            
            Charged
            
            
            
            BalanceA
            
            of
            
            Costs
      and
            
            to
      Other
            
            D
            
            at
      EndDescription
            
            Period
            
            Expenses
            
            Accounts
            
            Deductions
            
            of
      PeriodYear
      Ended December 31, 2005Deducted
      from asset accountsAllowance
      for loan losses
            
            $      2,343
            
            $           855
            
            $          —
            
            $           (60)
            (a)
            $     3,138Cumulative
      write-down ofreal
      estate owned (REO)
            
            1,000
            
            —
            
            —
            
            —
            
            1,000$      3,343
            
            $           855
            
            $          —
            
            $           (60)
            (a)
            $     4,138Year
      Ended December 31, 2006Deducted
      from asset accountsAllowance
      for loan losses
            
            $      3,138
            
            $           927
            
            $          —
            
            $      (1,279)
            (a)
            $     2,786Cumulative
      write-down ofreal
      estate owned (REO)
            
            1,000
            
            268
            
            —
            
            1,080
            (a)
            2,348$      4,138
            
            $        1,195
            
            $          —
            
            $         (199)
            (a)
            $     5,134Year
      Ended December 31, 2007Deducted
      from asset accountsAllowance
      for loan losses
            
            $      2,786
            
            $        1,788
            
            $          —
            
            $         (105)
            (a)
            $     4,469Cumulative
      write-down ofreal
      estate owned (REO)
            
            2,348
            
            —
            
            —
            
            (931)
            (a)
            1,417$      5,134
            
            $        1,788
            
            $          —
            
            $      (1,036)
            (a)
            $     5,886





Note (a)
- Represents write-offs of loans or transfers


55


REDWOOD
MORTGAGE INVESTORS VIII


(A
California Limited Partnership)


Schedule
IV – Mortgage Loans on Real Estate


Rule
12-29 Loans on Real Estate (continued)


For
the Years Ended December 31, 2007, 2006 and 2005


(in
thousands)





Col
      HPrincipalCol.
      F
            
            
            
            
            
            Amount
      ofFace
            
            
            Col.
      G
            
            
            LoansCol.
      C
            
            Col.
      D
            
            
            
            
            
            Amount
      of
            
            
            Carrying
            
            
            Subject
      to
            
            
            Col.
      JCol.
      B
            
            Final
            
            Periodic
            
            
            Col.
      E
            
            
            Mortgage
            
            
            Amount
      of
            
            
            Delinquent
            
            Col.
      I
            CaliforniaCol.
      A
            
            Interest
            
            Maturity
            
            Payment
            
            
            Prior
            
            
            Original
            
            
            Mortgage
            
            
            Principal
            
            Type
      of
            GeographicDescrip.
            
            Rate
            
            Date
            
            Terms
            
            
            Liens
            
            
            Amount
            
            
            Investments
            
            
            or
      Interest
            
            Lien
            LocationComm.
            
            
            11.75
            %
            12/01/09
            
            $
            3
            
            
            $
            —
            
            
            $
            148
            
            
            $
            61
            
            
            $
            —
            
            1st
            YubaRes.
            
            
            12.00
            %
            05/01/03
            
            
            12
            
            
            
            —
            
            
            
            1,210
            
            
            
            1,210
            
            
            
            1,210
            
            1st
            MarinApts.
            
            
            12.50
            %
            02/14/10
            
            
            4
            
            
            
            53
            
            
            
            39
            
            
            
            304
            
            
            
            —
            
            2nd
            Contra
      CostaLand
            
            
            9.50
            %
            07/01/09
            
            
            8
            
            
            
            —
            
            
            
            987
            
            
            
            986
            
            
            
            —
            
            1st
            Santa
      ClaraComm.
            
            
            13.00
            %
            11/01/06
            
            
            44
            
            
            
            8,100
            
            
            
            4,550
            
            
            
            4,072
            
            
            
            4,072
            
            2nd
            Santa
      ClaraComm.
            
            
            11.25
            %
            04/01/08
            
            
            9
            
            
            
            —
            
            
            
            900
            
            
            
            747
            
            
            
            —
            
            1st
            El
      DoradoComm.
            
            
            12.00
            %
            07/01/09
            
            
            25
            
            
            
            —
            
            
            
            2,500
            
            
            
            2,500
            
            
            
            —
            
            1st
            SacramentoApts.
            
            
            9.50
            %
            01/01/09
            
            
            4
            
            
            
            —
            
            
            
            413
            
            
            
            395
            
            
            
            —
            
            1st
            San
      JoaquinRes.
            
            
            8.50
            %
            10/01/10
            
            
            4
            
            
            
            189
            
            
            
            500
            
            
            
            484
            
            
            
            —
            
            2nd
            AlamedaRes.
            
            
            8.50
            %
            02/01/09
            
            
            1
            
            
            
            42
            
            
            
            85
            
            
            
            82
            
            
            
            —
            
            3rd
            San
      MateoComm.
            
            
            9.00
            %
            06/01/09
            
            
            4
            
            
            
            2,850
            
            
            
            500
            
            
            
            487
            
            
            
            —
            
            2nd
            Santa
      ClaraRes.
            
            
            9.25
            %
            07/01/09
            
            
            6
            
            
            
            16
            
            
            
            690
            
            
            
            673
            
            
            
            —
            
            2nd
            San
      MateoComm.
            
            
            9.00
            %
            08/01/09
            
            
            12
            
            
            
            —
            
            
            
            2,000
            
            
            
            1,600
            
            
            
            —
            
            1st
            San
      FranciscoComm.
            
            
            9.50
            %
            08/01/09
            
            
            16
            
            
            
            —
            
            
            
            1,947
            
            
            
            1,902
            
            
            
            —
            
            1st
            AlamedaRes.
            
            
            8.75
            %
            09/01/06
            
            
            88
            
            
            
            —
            
            
            
            11,684
            
            
            
            11,684
            
            
            
            —
            
            1st
            Contra
      CostaRes.
            
            
            10.00
            %
            12/31/07
            
            
            75
            
            
            
            11,684
            
            
            
            15,288
            
            
            
            8,701
            
            
            
            —
            
            2nd
            Contra
      CostaComm.
            
            
            9.50
            %
            01/01/09
            
            
            25
            
            
            
            —
            
            
            
            3,113
            
            
            
            3,113
            
            
            
            —
            
            1st
            San
      FranciscoRes.
            
            
            8.50
            %
            03/15/10
            
            
            10
            
            
            
            2,097
            
            
            
            450
            
            
            
            438
            
            
            
            —
            
            2nd
            NapaComm.
            
            
            10.00
            %
            02/01/08
            
            
            16
            
            
            
            2,200
            
            
            
            2,335
            
            
            
            1,857
            
            
            
            —
            
            1st
            AmadorComm.
            
            
            9.00
            %
            03/01/10
            
            
            2
            
            
            
            179
            
            
            
            204
            
            
            
            196
            
            
            
            —
            
            2nd
            MontereyRes.
            
            
            9.25
            %
            07/01/08
            
            
            7
            
            
            
            —
            
            
            
            4,464
            
            
            
            889
            
            
            
            —
            
            1st
            SutterRes.
            
            
            9.25
            %
            05/01/10
            
            
            1
            
            
            
            411
            
            
            
            160
            
            
            
            157
            
            
            
            —
            
            2nd
            San
      MateoRes.
            
            
            10.00
            %
            03/01/09
            
            
            77
            
            
            
            36,000
            
            
            
            8,165
            
            
            
            8,983
            
            
            
            —
            
            2nd
            San
      FranciscoRes.
            
            
            9.00
            %
            05/01/10
            
            
            1
            
            
            
            286
            
            
            
            70
            
            
            
            69
            
            
            
            —
            
            2nd
            El
      DoradoRes.
            
            
            8.50
            %
            10/01/10
            
            
            2
            
            
            
            379
            
            
            
            325
            
            
            
            318
            
            
            
            —
            
            3rd
            AlamedaComm.
            
            
            8.42
            %
            10/01/08
            
            
            37
            
            
            
            5,731
            
            
            
            5,341
            
            
            
            5,341
            
            
            
            —
            
            1st
            AlamedaRes.
            
            
            12.50
            %
            07/01/08
            
            
            44
            
            
            
            19,700
            
            
            
            4,250
            
            
            
            4,112
            
            
            
            —
            
            2nd
            San
      MateoComm.
            
            
            9.00
            %
            08/01/15
            
            
            13
            
            
            
            9,500
            
            
            
            1,000
            
            
            
            913
            
            
            
            913
            
            2nd.
            San
      FranciscoRes.
            
            
            9.00
            %
            08/01/10
            
            
            1
            
            
            
            —
            
            
            
            140
            
            
            
            138
            
            
            
            —
            
            1st
            VenturaRes.
            
            
            8.50
            %
            04/01/09
            
            
            3
            
            
            
            —
            
            
            
            3,450
            
            
            
            441
            
            
            
            —
            
            1st
            SacramentoRes.
            
            
            9.00
            %
            04/01/09
            
            
            22
            
            
            
            2,033
            
            
            
            2,325
            
            
            
            2,812
            
            
            
            —
            
            2nd
            SacramentoRes.
            
            
            9.25
            %
            07/01/08
            
            
            24
            
            
            
            —
            
            
            
            3,555
            
            
            
            3,272
            
            
            
            —
            
            1st
            San
      JoaquinComm.
            
            
            9.50
            %
            10/01/10
            
            
            11
            
            
            
            105
            
            
            
            1,250
            
            
            
            1,232
            
            
            
            —
            
            2nd.
            AlamedaRes.
            
            
            9.25
            %
            07/01/08
            
            
            8
            
            
            
            —
            
            
            
            1,265
            
            
            
            1,177
            
            
            
            —
            
            1st
            San
      JoaquinRes.
            
            
            11.00
            %
            05/01/08
            
            
            38
            
            
            
            18,744
            
            
            
            4,080
            
            
            
            4,031
            
            
            
            —
            
            2nd
            Santa
      ClaraComm.
            
            
            9.50
            %
            10/01/10
            
            
            37
            
            
            
            —
            
            
            
            4,200
            
            
            
            4,110
            
            
            
            —
            
            1st
            AlamedaRes.
            
            
            10.00
            %
            11/01/07
            
            
            20
            
            
            
            11,500
            
            
            
            2,564
            
            
            
            2,407
            
            
            
            2,407
            
            2nd
            Contra
      CostaRes.
            
            
            12.00
            %
            12/01/07
            
            
            13
            
            
            
            3,797
            
            
            
            1,265
            
            
            
            1,265
            
            
            
            1,265
            
            2nd
            San
      DiegoComm.
            
            
            9.50
            %
            04/01/08
            
            
            23
            
            
            
            —
            
            
            
            2,900
            
            
            
            2,898
            
            
            
            —
            
            1st
            San
      FranciscoRes.
            
            
            10.00
            %
            01/01/08
            
            
            14
            
            
            
            2,187
            
            
            
            4,500
            
            
            
            1,684
            
            
            
            —
            
            2nd
            AlamedaRes.
            
            
            9.00
            %
            02/01/08
            
            
            68
            
            
            
            —
            
            
            
            15,188
            
            
            
            ,120
            
            
            
            9,120
            
            1st
            Los
      AngelesRes.
            
            
            10.25
            %
            02/01/08
            
            
            102
            
            
            
            14,632
            
            
            
            11,529
            
            
            
            11,529
            
            
            
            11,529
            
            2nd
            Los
      AngelesRes.
            
            
            9.00
            %
            02/01/11
            
            
            11
            
            
            
            —
            
            
            
            1,350
            
            
            
            1,332
            
            
            
            —
            
            1st
            PlacerRes.
            
            
            10.25
            %
            09/01/07
            
            
            88
            
            
            
            39,000
            
            
            
            8,350
            
            
            
            10,338
            
            
            
            10,338
            
            2nd
            Los
      AngelesRes.
            
            
            9.25
            %
            04/01/08
            
            
            271
            
            
            
            22,876
            
            
            
            40,444
            
            
            
            34,383
            
            
            
            —
            
            2nd
            SacramentoRes.
            
            
            10.00
            %
            05/01/08
            
            
            31
            
            
            
            22,155
            
            
            
            4,184
            
            
            
            3,566
            
            
            
            —
            
            2nd
            AlamedaRes.
            
            
            10.00
            %
            05/01/08
            
            
            17
            
            
            
            12,512
            
            
            
            2,200
            
            
            
            1,988
            
            
            
            1,988
            
            2nd
            Alameda


56


REDWOOD
MORTGAGE INVESTORS VIII


(A
California Limited Partnership)


Schedule
IV – Mortgage Loans on Real Estate


Rule
12-29 Loans on Real Estate (continued)


For
the Years Ended December 31, 2007, 2006 and 2005


(in
thousands)





Col
      HPrincipalCol.
      F
            
            Amount
      ofFace
            Col.
      G
            LoansCol.
      C
            Col.
      D
            
            Amount
      of
            Carrying
            Subject
      to
            
            Col.
      JCol.
      B
            Final
            Periodic
            Col.
      E
            Mortgage
            Amount
      of
            Delinquent
            Col.
      I
            CaliforniaCol.
      A
            Interest
            Maturity
            Payment
            Prior
            Original
            Mortgage
            Principal
            Type
      of
            GeographicDescrip.
            Rate
            Date
            Terms
            Liens
            Amount
            Investments
            or
      Interest
            Lien
            LocationRes.
            10.00%
            05/01/08
            12
            9,576
            1,696
            1,379
            1,379
            2nd
            AlamedaRes.
            9.50%
            06/01/07
            37
            —
            6,796
            4,496
            —
            1st
            FresnoRes.
            10.00%
            08/01/09
            85
            32,200
            10,175
            9,847
            —
            2nd
            San
      FranciscoRes.
            8.88%
            07/01/11
            16
            4,550
            2,100
            2,100
            —
            2nd
            San
      FranciscoRes.
            8.75%
            07/01/08
            40
            —
            5,520
            5,520
            —
            1st.
            Contra
      CostaRes.
            10.00%
            07/01/08
            63
            5,520
            6,225
            7,344
            —
            2nd
            Contra
      CostaComm.
            12.00%
            7/1/2009
            39
            2,500
            3,858
            3,763
            —
            2nd
            SacramentoRes.
            9.75%
            8/1/2011
            1
            165
            66
            66
            —
            2nd
            StanislausRes.
            9.75%
            09/01/11
            1
            120
            120
            119
            119
            2nd
            San
      BernardinoRes.
            9.75%
            09/01/11
            7
            2,550
            850
            844
            —
            2nd
            San
      FranciscoRes.
            9.25%
            09/01/11
            7
            —
            800
            793
            —
            1st
            San
      JoaquinRes.
            9.75%
            09/01/11
            1
            120
            80
            79
            80
            2nd
            HumboldtRes.
            10.25%
            10/01/08
            20
            —
            3,949
            2,220
            —
            1st
            Contra
      CostaLand
            7.00%
            10/01/09
            3
            —
            928
            588
            —
            1st
            StanislausRes.
            9.25%
            11/01/11
            1
            —
            125
            149
            —
            1st
            San
      FranciscoRes.
            9.00%
            11/01/11
            1
            769
            100
            99
            99
            2nd
            Los
      AngelesApts.
            10.25%
            11/01/11
            4
            —
            450
            447
            —
            1st
            ButteRes.
            9.50%
            11/01/12
            34
            —
            6,200
            3,629
            —
            1st
            San
      MateoRes.
            10.00%
            12/01/11
            3
            —
            345
            345
            345
            1st
            AlamedaComm.
            10.25%
            12/01/08
            2
            —
            275
            275
            —
            1st
            KernRes.
            10.25%
            01/01/09
            30
            —
            3,550
            3,550
            —
            1st
            NapaRes.
            9.25%
            01/01/12
            1
            238
            130
            129
            —
            2nd
            RiversideRes.
            9.75%
            01/01/11
            5
            330
            561
            560
            560
            2nd
            San
      DiegoRes.
            10.25%
            01/01/09
            3
            —
            1,372
            359
            —
            1st
            Santa
      ClaraApts.
            9.25%
            01/01/10
            3
            —
            345
            345
            —
            1st
            San
      FranciscoRes.
            9.75%
            02/01/12
            1
            245
            73
            73
            73
            2nd
            YoloComm.
            10.50%
            01/01/10
            24
            —
            2,750
            2,750
            2,750
            1st
            San
      FranciscoRes.
            9.75%
            03/01/12
            1
            —
            128
            127
            —
            1st
            KernRes.
            10.00%
            02/01/12
            2
            —
            231
            230
            —
            1st
            Los
      AngelesRes.
            10.25%
            02/01/10
            5
            —
            630
            630
            —
            1st
            San
      JoaquinApts.
            9.75%
            02/01/08
            3
            —
            420
            420
            —
            1st
            SolanoRes.
            12.00%
            09/01/08
            54
            30,277
            4,443
            7,068
            —
            2nd
            San
      FranciscoRes.
            9.25%
            02/01/12
            1
            —
            100
            100
            —
            1st
            San
      BernardinoRes.
            9.25%
            02/01/12
            2
            800
            300
            298
            —
            2nd
            SolanoRes.
            10.00%
            03/01/09
            12
            —
            8,365
            1,350
            —
            1st
            San
      FranciscoComm.
            10.00%
            04/01/12
            3
            2,256
            300
            300
            —
            2nd
            ButteRes.
            10.00%
            09/01/08
            11
            —
            1,272
            1,272
            —
            1st
            SolanoApts.
            10.50%
            04/01/09
            26
            —
            3,015
            3,015
            —
            1st.
            San
      FranciscoApts.
            10.50%
            04/01/10
            6
            826
            700
            693
            —
            2nd
            NapaApts.
            10.25%
            12/01/08
            13
            7,560
            1,540
            1,462
            —
            2nd
            Santa
      ClaraLand
            10.00%
            05/01/08
            7
            —
            833
            833
            —
            1st
            AlamedaRes.
            9.75%
            05/01/10
            30
            13,944
            3,750
            3,750
            —
            2nd
            RiversideRes.
            9.25%
            06/01/09
            44
            1,650
            5,750
            5,750
            —
            1st
            San
      DiegoComm.
            10.00%
            06/01/10
            138
            4,000
            16,500
            16,500
            —
            1st
            San
      Francisco


57


REDWOOD
MORTGAGE INVESTORS VIII


(A
California Limited Partnership)


Schedule
IV – Mortgage Loans on Real Estate


Rule
12-29 Loans on Real Estate (continued)


For
the Years Ended December 31, 2007, 2006 and 2005


(in
thousands)





Col
      HPrincipalCol.
      F
            
            
            
            
            
            Amount
      ofFace
            
            
            Col.
      G
            
            
            LoansCol.
      C
            
            Col.
      D
            
            
            
            
            
            Amount
      of
            
            
            Carrying
            
            
            Subject
      to
            
            
            Col.
      JCol.
      B
            
            Final
            
            Periodic
            
            
            Col.
      E
            
            
            Mortgage
            
            
            Amount
      of
            
            
            Delinquent
            
            Col.
      I
            CaliforniaCol.
      A
            Interest
            
            Maturity
            
            Payment
            
            
            Prior
            
            
            Original
            
            
            Mortgage
            
            
            Principal
            
            Type
      of
            GeographicDescrip.
            Rate
            
            Date
            
            Terms
            
            
            Liens
            
            
            Amount
            
            
            Investments
            
            
            or
      Interest
            
            Lien
            LocationRes.
            
            
            9.75
            %
            07/01/12
            
            
            30
            
            
            
            11,397
            
            
            
            3,677
            
            
            
            3,677
            
            
            
            —
            
            2nd
            San
      FranciscoRes.
            
            
            10.00
            %
            07/01/12
            
            
            2
            
            
            
            —
            
            
            
            205
            
            
            
            205
            
            
            
            —
            
            1st
            RiversideRes.
            
            
            10.00
            %
            07/01/12
            
            
            2
            
            
            
            —
            
            
            
            263
            
            
            
            262
            
            
            
            262
            
            1st
            Los
      AngelesRes.
            
            
            9.50
            %
            07/01/12
            
            
            3
            
            
            
            —
            
            
            
            374
            
            
            
            373
            
            
            
            —
            
            1st
            MaderaComm.
            
            
            10.50
            %
            08/01/08
            
            
            7
            
            
            
            8,000
            
            
            
            1,000
            
            
            
            814
            
            
            
            —
            
            2nd
            San
      FranciscoRes.
            
            
            9.75
            %
            08/01/12
            
            
            10
            
            
            
            —
            
            
            
            1,163
            
            
            
            1,163
            
            
            
            1,163
            
            1st
            RiversideComm.
            
            
            10.50
            %
            08/01/08
            
            
            55
            
            
            
            —
            
            
            
            6,240
            
            
            
            6,240
            
            
            
            —
            
            1st
            San
      FranciscoRes.
            
            
            10.00
            %
            08/01/12
            
            
            3
            
            
            
            613
            
            
            
            350
            
            
            
            349
            
            
            
            —
            
            2nd
            Contra
      CostaComm.
            
            
            9.50
            %
            09/01/10
            
            
            36
            
            
            
            19,700
            
            
            
            4,600
            
            
            
            4,600
            
            
            
            —
            
            2nd
            SonomaRes.
            
            
            10.00
            %
            11/01/12
            
            
            2
            
            
            
            —
            
            
            
            263
            
            
            
            263
            
            
            
            —
            
            1st
            SacramentoRes.
            
            
            9.25
            %
            11/01/12
            
            
            1
            
            
            
            506
            
            
            
            100
            
            
            
            100
            
            
            
            —
            
            1st
            San
      DiegoRes.
            
            
            10.00
            %
            11/01/09
            
            
            14
            
            
            
            —
            
            
            
            1,648
            
            
            
            1,648
            
            
            
            —
            
            1st
            San
      MateoRes.
            
            
            9.25
            %
            11/01/12
            
            
            3
            
            
            
            —
            
            
            
            377
            
            
            
            377
            
            
            
            —
            
            1st
            OrangeRes.
            
            
            10.25
            %
            12/01/09
            
            
            1
            
            
            
            335
            
            
            
            100
            
            
            
            100
            
            
            
            —
            
            3rd
            Contra
      CostaComm.
            
            
            10.50
            %
            11/01/09
            
            
            55
            
            
            
            —
            
            
            
            7,250
            
            
            
            6,129
            
            
            
            —
            
            1st
            AlamedaRes.
            
            
            9.50
            %
            11/01/08
            
            
            2
            
            
            
            —
            
            
            
            275
            
            
            
            275
            
            
            
            —
            
            1st
            AlamedaLand
            
            
            10.50
            %
            12/01/09
            
            
            2
            
            
            
            —
            
            
            
            250
            
            
            
            250
            
            
            
            —
            
            1st
            LakeComm.
            
            
            10.50
            %
            11/01/08
            
            
            100
            
            
            
            22,300
            
            
            
            12,000
            
            
            
            11,375
            
            
            
            —
            
            2nd
            AlamedaRes.
            
            
            10.00
            %
            11/01/12
            
            
            2
            
            
            
            —
            
            
            
            209
            
            
            
            209
            
            
            
            —
            
            1st
            CalaverasRes.
            
            
            9.25
            %
            12/01/12
            
            
            2
            
            
            
            385
            
            
            
            186
            
            
            
            186
            
            
            
            —
            
            2nd
            Los
      AngelesLand
            
            
            10.50
            %
            12/01/09
            
            
            9
            
            
            
            —
            
            
            
            1,000
            
            
            
            1,000
            
            
            
            —
            
            1st
            AlamedaRes.
            
            
            9.00
            %
            01/01/13
            
            
            2
            
            
            
            358
            
            
            
            204
            
            
            
            204
            
            
            
            —
            
            2nd
            San
      MateoRes.
            
            
            10.00
            %
            01/01/13
            
            
            1
            
            
            
            349
            
            
            
            100
            
            
            
            100
            
            
            
            —
            
            2nd
            Santa
      ClaraRes.
            
            
            10.00
            %
            01/01/13
            
            
            5
            
            
            
            —
            
            
            
            556
            
            
            
            556
            
            
            
            —
            
            1st
            Contra
      CostaComm.
            
            
            10.00
            %
            07/01.08
            
            
            79
            
            
            
            —
            
            
            
            9,450
            
            
            
            9,450
            
            
            
            —
            
            1st
            Los
      Angeles$
            2,852
            
            
            $
            433,797
            
            
            $
            347,613
            
            
            $
            305,568
            
            
            $
            49,672





58


REDWOOD
MORTGAGE INVESTORS VIII


(A
California Limited Partnership)


Schedule
IV – Mortgage Loans on Real Estate


Rule
12-29 Loans on Real Estate (continued)


(in
thousands)








Reconciliation
of carrying amount (cost) of loans at close of periods





Year
      ended December 31,





2007
            
            
            
            2006
            
            
            
            2005Balance
      at beginning of year
            
            $
            261,097
            
            
            $
            214,012
            
            
            $
            171,745Additions
      during periodNew
      loans
            
            
            137,635
            
            
            
            159,745
            
            
            
            169,460Other
            
            
            —
            
            
            
            588
            
            
            
            —Total
      additions
            
            
            137,635
            
            
            
            160,333
            
            
            
            169,460Deductions
      during periodCollections
      of principal
            
            
            91,134
            
            
            
            107,656
            
            
            
            118,772Foreclosures
            
            
            1,320
            
            
            
            5,464
            
            
            
            8,361Cost
      of loans sold
            
            
            —
            
            
            
            —
            
            
            
            —Amortization
      of premium
            
            
            —
            
            
            
            —
            
            
            
            —Other
            
            
            710
            
            
            
            128
            
            
            
            60Total
      deductions
            
            
            93,164
            
            
            
            113,248
            
            
            
            127,193Balance
      at close of year
            
            $
            305,568
            
            
            $
            261,097
            
            
            $
            214,012





59


Item 9 – Changes in and
Disagreements with Accountants on Accounting and Financial
Disclosure





There
were no disagreements with the partnership’s independent registered public
accounting firm during the years ended December 31, 2007 and 2006.





Item 9a – Controls and
Procedures





As of
December 31, 2007, the partnership carried out an evaluation, under the
supervision and with the participation of the general partners of the
effectiveness of the design and operation of the partnership’s disclosure
controls and procedures pursuant to Rule 13a-15 of the Securities Exchange Act
of 1934, as amended.  Based upon that evaluation, the general partners
concluded that the partnership’s disclosure controls and procedures are
effective for the purposes set forth in Rule 13a-15.  There were no
changes in the partnership’s internal control over financial reporting during
the partnership’s fourth fiscal quarter that have materially affected, or are
reasonably likely to materially affect, the partnership’s internal control over
financial reporting.








Item 9b – Other
Information





None





Part III





Item 10 – Directors,
Executive Officers and Corporate Governance





The
partnership has no Officers or Directors. Rather, the activities of the
partnership are managed by three general partners, one of whom is an individual,
Michael R. Burwell.  The other two general partners are Gymno
Corporation and Redwood Mortgage Corp. Both are California corporations, formed
in 1986 and 1978, respectively.  Mr. Burwell is one of the three
shareholders of Gymno Corporation, a California corporation, and has a
controlling interest in this company through his ownership of stock and as
trustee of the Burwell trusts, which have a 50 percent interest in
Gymno.  Redwood Mortgage Corp. is a subsidiary of The Redwood Group
Ltd., whose principal stockholders are the Burwell Trusts, the other shareholder
of Gymno Corporation and Michael R. Burwell.  Michael R. Burwell has a
controlling interest in these companies through his stock ownership or as
trustee of the Burwell trusts.





The
General Partners.





Michael R.
Burwell.Michael R. Burwell, age 51, General Partner, past
member of Board of Trustees and Treasurer, Mortgage Brokers Institute
(1984-1986); President, Director, Chief Financial Officer, Redwood Mortgage
Corp. (1979-present); Director, Secretary and Treasurer A & B Financial
Services, Inc. (1980-present); President, Director, Chief Financial Officer and
Secretary (since 1986) of Gymno Corporation; President, Director, Secretary and
Treasurer of The Redwood Group, Ltd. (1979-present). Mr. Burwell is
licensed as a real estate sales person.





Gymno
Corporation.Gymno Corporation, General Partner, is a
California corporation formed in 1986 for the purpose of acting as a general
partner of this partnership and of other limited partnerships formed by the
individual general partners.  The shares in Gymno Corporation are held
equally by Michael R. Burwell and the Burwell trusts.  Michael R.
Burwell is a director of Gymno and the director position previously held by D.
Russell Burwell is currently vacant.  Michael R. Burwell is its
President, Chief Financial Officer and Secretary.  Michael R. Burwell
has a controlling interest in this company through his stock ownership or as
trustee of the Burwell trusts.





60


Redwood Mortgage
Corp.Redwood Mortgage Corp. is a licensed real estate broker
incorporated in 1978 under the laws of the State of California, and is engaged
primarily in the business of arranging and servicing mortgage
loans.  Redwood Mortgage Corp. will act as the loan broker and
servicing agent in connection with loans, as it has done on behalf of several
other limited partnerships formed by the general partners.





Financial
Oversight by General Partners.





The
partnership does not have a board of directors or an audit
committee.  Accordingly, the general partners serve the equivalent
function of an audit committee for, among other things, the following purposes:
appointment, compensation, review and oversight of the work of our independent
public accountants, and establishing the enforcing of the Code of
Ethics.  However, since the partnership does not have an audit
committee and the general partners are not independent of the partnership, the
partnership does not have an “audit committee financial expert.”





Code
of Ethics.





The
general partners have adopted a Code of Ethics applicable to the general
partners and to any agents, employees or independent contractors engaged by the
general partners to perform the functions of a principal financial officer,
principal accounting officer or controller of the partnership, if
any.  You may obtain a copy of this Code of Ethics, without charge,
upon request by calling our Investor Services Department at (650)
365-5341.








61


Item 11 – Executive
Compensation








COMPENSATION OF THE GENERAL
PARTNERS AND AFFILIATES BY PARTNERSHIP





As
indicated above in Item 10, the partnership has no Officers or
Directors.  The partnership is managed by the general
partners.  There are certain fees and other items paid to management
and related parties.





A more
complete description of management compensation is found in the prospectus
(S-11) dated August 4, 2005, page 6, under the section “Compensation of the
General Partners and the Affiliates”, which is incorporated by
reference.  Such compensation is summarized below.





The
following compensation has been paid to the general partners and affiliates for
services rendered during the year ended December 31, 2007.  All such
compensation is in compliance with the guidelines and limitations set forth in
the partnership agreement.





Entity
      Receiving Compensation
            Description
      of Compensation and Services Rendered
            AmountI. Redwood Mortgage
      Corp.
            Mortgage
      Servicing Fee for servicing loans
            $1,449,000(General
      Partner)General
      Partners &/or Affiliates
            Asset
      Management Fee for managing assets
            $1,143,000General
      Partners
            1%
      interest in profits
            $216,000Less
      allocation of syndication costs
            $4,000$212,000General
      Partners &/or Affiliates
            Portion
      of early withdrawal penalties applied toreduce
      Formation Loan
            $73,000








II.
FEES PAID BY BORROWERS ON MORTGAGE LOANS PLACED WITH THE PARTNERSHIP BY
COMPANIES RELATED TO THE GENERAL PARTNERS DURING THE YEAR ENDED DECEMBER 31,
2007 (EXPENSES OF BORROWERS NOT OF THE PARTNERSHIP)





Redwood
      Mortgage Corp.
            Mortgage
      Brokerage Commissions for services inconnection
      with the review, selection, evaluation,negotiation,
      and extension of the loans paid by theborrowers
      and not by the partnership
            $2,932,000Redwood
      Mortgage Corp.
            Processing
      and Escrow Fees for services inconnection
      with notary, document preparation, creditinvestigation,
      and escrow fees payable by the borrowersand
      not by the partnership
            $40,000Gymno
      Corporation
            Reconveyance
      Fee
            $16,193





III.
IN ADDITION, THE GENERAL PARTNERS AND/OR RELATED COMPANIES PAY CERTAIN EXPENSES
ON BEHALF OF THE PARTNERSHIP FOR WHICH IT IS REIMBURSED AS NOTED IN THE
CONSOLIDATED STATEMENTS OF INCOME DURING THE YEAR ENDED DECEMBER 31, 2007 . . .
.. . . . . . . . . . . . . . . . . .  $333,000








62


Item 12 – Security Ownership
of Certain Beneficial Owners and Management, and Related Stockholder
Matters





The
general partners own a combined total of 1% of the partnership including a 1%
portion of income and losses.








Item 13 – Certain
Relationships and Related Transactions, and Director
Independence





Refer to
footnotes 3 and 4 of the Notes to Consolidated Financial Statements in Part II
item 8, which describes related party fees and data.





Also
refer to the Prospectus dated August 4, 2005, (incorporated herein by reference)
on page 6 “Summary of the Offering – Compensation of General Partners and
Affiliates”.





For a
description of the partnership’s policies and procedures for the review,
approval or ratification of related party transactions, refer also to the
Prospectus dated August 4, 2005 (incorporated herein by reference) for the
discussion under the caption “Compensation of the General Partners and
affiliates” beginning on page 23, the discussion under the caption “Conflicts of
Interest” beginning on page 28 and the discussion under the captions “Investment
Objectives and Criteria – Loans to General Partners and Affiliates” and
“Investment Objectives and Criteria – Purchase of Loans From Affiliates and
Other Third Parties” on page 42.





Since the
partnership does not have a board of directors and since the general partners
are not considered independent of the partnership, the partnership does not have
the equivalent of independent directors.








Item 14 – Principal
Accountant Fees and Services





Fees for
services performed for the partnership by the principal accountant for 2007 and
2006 are as follows:





Audit Fees  The
aggregate fees billed during the years ended December 31, 2007 and 2006 for
professional services rendered for the audit of the partnership’s annual
financial statements included in the partnership’s Annual Report on Form 10-K,
review of financial statements included in the partnership’s Quarterly Reports
on Form 10-Q and for services provided in connection with regulatory filings
were $180,624 and $211,086, respectively.





Audit Related
Fees  There were no fees billed during the years ended December
31, 2007 and 2006 for audit-related services.





Tax fees  The
aggregate fees billed for tax services for the years ended December 31, 2007 and
2006, were $10,525 and $10,514, respectively.  These fees relate to
professional services rendered primarily for tax compliance.





All Other
Fees  There were no other fees billed during the years ended
December 31, 2007 and 2006.





All audit
and non-audit services are approved by the general partner prior to the
accountant being engaged by the partnership.








63


Part IV








Item 15 – Exhibits,
Financial Statements and Schedules





A.           Documents
filed as part of this report are incorporated:





1.
            In
      Part II, Item 8 under A – Consolidated Financial
    Statements.





2.
      The Consolidated Financial Statement Schedules are listed in Part II -
      Item 8 under B – Consolidated Financial Statement
    Schedules.





3.
            Exhibits.





Exhibit
      No.
            
            Description
      of Exhibits





3.1
            
            Limited
      Partnership Agreement3.2
            
            Form
      of Certificate of Limited Partnership Interest3.3
            
            Certificate
      of Limited Partnership10.1
            
            Escrow
      Agreement10.2
            
            Servicing
      Agreement10.3
            (a)
            Form
      of Note secured by Deed of Trust for Construction Loans, which provides
      for principal and interest payments.(b)
            Form
      of Note secured by Deed of Trust for Commercial and Multi-Family loans
      which provides for principal and interest payments(c)
            Form
      of Note secured by Deed of Trust for Commercial and Multi-Family loans
      which provides for interest only payments(d)
            Form
      of Note secured by Deed of Trust for Single Family Residential Loans,
      which provides for interest and principal payments.(e)
            Form
      of Note secured by Deed of Trust for Single Family Residential loans,
      which provides for interest only payments.10.4
            (a)
            Deed
      of Trust, Assignment of Leases and Rents, Security Agreement and Fixture
      Filing to accompany Exhibits   10.3 (a), and
      (c).(b)
            Deed
      of Trust, Assignment of Leases and Rents, Security Agreement and Fixture
      Filing to accompany Exhibit 10.3 (b).(c)
            Deed
      of Trust, Assignment of Leases and Rents, Security Agreement and Fixture
      Filing to accompany Exhibit 10.3 (c).10.5
            
            Promissory
      Note for Formation Loan10.6
            
            Agreement
      to Seek a Lender31.1
            
            Certification
      of General Partner pursuant to Section 302 of the Sarbanes-Oxley Act of
      200231.2
            
            Certification
      of General Partner pursuant to Section 302 of the Sarbanes-Oxley Act of
      200231.3
            
            Certification
      of General Partner pursuant to Section 302 of the Sarbanes-Oxley Act of
      200232.1
            
            Certification
      of General Partner pursuant to Section 906 of the Sarbanes-Oxley Act of
      200232.2
            
            Certification
      of General Partner pursuant to Section 906 of the Sarbanes-Oxley Act of
      200232.3
            
            Certification
      of General Partner pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002





All of
the above exhibits, other than exhibit 31.1, 31.2, 31.3, 32.1, 32.2 and 32.3,
were previously filed as the exhibits to Registrant’s Registration Statement on
Form S-11 (Registration No. 333-106900 and incorporated by reference
herein).





B.           See
A (3) above.





C.
            See
      A (2) above. Additional reference is made to the prospectus (filed as part
      of the S-11 registration statement) dated August 4, 2005, supplement No. 5
      dated March 6, 2008 (post effective amendment No. 7 to the S-11
      registration statement), for financial data related to Gymno Corporation,
      and Redwood Mortgage Corp., the Corporate General
  Partners.





64





SIGNATURES





Pursuant
to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of
1934 the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereto duly authorized on the 31st day of March,
2008.








REDWOOD
      MORTGAGE INVESTORS VIII








By:
            /S/
      Michael R. BurwellMichael
      R. Burwell, General PartnerBy:
            Gymno
      Corporation, General PartnerBy:
            /S/
      Michael R. BurwellMichael
      R. Burwell, President, Secretary,and
      Principal Financial OfficerBy:
            Redwood
      Mortgage Corp.By:
            /S/
      Michael R. BurwellMichael
      R. Burwell, President,Secretary/Treasurer








65


Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacity indicated on the 31st day of March, 2008.








Signature
            Title
            Date











/S/
      Michael R. BurwellMichael
      R. Burwell
            
            General
      Partner
            
            March
      31, 2008











/S/
      Michael R. BurwellMichael
      R. Burwell
            
            President
      of Gymno Corporation, (Principal Executive Officer); Director of Gymno
      Corporation Secretary/Treasurer of Gymno Corporation (Principal Financial
      and Accounting Officer)
            
            March
      31, 2008











/S/
      Michael R. BurwellMichael
      R. Burwell
            
            President,
      Secretary/Treasurer of Redwood Mortgage Corp. (Principal Financial and
      Accounting Officer);
              Director
      of Redwood Mortgage Corp.
            
            March
      31, 2008





66


Exhibit
31.1





GENERAL
PARTNER CERTIFICATION








I,
Michael R. Burwell, certify that:





1.
            I
      have reviewed this annual report on Form 10-K of Redwood Mortgage
      Investors VIII, a California Limited Partnership (the
      “Registrant”);





2.
            Based
      on my knowledge, this report does not contain any untrue statement of a
      material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      report;





3.
            Based
      on my knowledge, the financial statements, and other financial information
      included in this report, fairly present in all material respects the
      financial condition, results of operations and cash flows of the
      Registrant as of, and for, the periods presented in this
      report;





4.
            The
      Registrant’s other certifying officers and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant
      and we have:





(a)
            designed
      such disclosure controls and procedures, or caused such disclosure
      controls and procedures to be designed under our supervision, to ensure
      that material information relating to the Registrant, including its
      consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this annual report is
      being prepared;





(b)
            evaluated
      the effectiveness of the Registrant’s disclosure controls and procedures
      and presented in this report our conclusions about the effectiveness of
      the disclosure controls and procedures, as of the end of the period
      covered by this report based on such evaluation;
  and





(c)
            disclosed
      in this report any change in the Registrant’s control over financial
      reporting that occurred during the Registrant’s most recent fiscal quarter
      (the Registrant’s fourth fiscal quarter in the case of an annual report)
      that has materially affected, or is reasonably likely to materially
      affect, the Registrant’s internal control over financial reporting;
      and





5.
            The
      Registrant’s other certifying officers and I have disclosed, based on our
      most recent evaluation of internal control over financial reporting, to
      the Registrant’s auditors and the audit committee of the Registrant’s
      board of directors (or persons performing the equivalent
      functions):





(a)
            all
      significant deficiencies and material weaknesses in the design or
      operation of internal control over financial reporting which are
      reasonably likely to adversely affect the Registrant’s ability to record,
      process, summarize and report financial information;
  and





(b)
            any
      fraud, whether or not material, that involves management or other
      employees who have a significant role in the Registrant’s internal control
      over financial reporting.














/s/
Michael R. Burwell


_____________________________


Michael
R. Burwell, General Partner


March 31,
2008


67


Exhibit
      31.2








PRESIDENT
AND CHIEF FINANCIAL OFFICER CERTIFICATION





I,
Michael R. Burwell, certify that:





1.
            I
      have reviewed this annual report on Form 10-K of Redwood Mortgage
      Investors VIII, a California Limited Partnership (the
      “Registrant”);





2.
            Based
      on my knowledge, this report does not contain any untrue statement of a
      material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      report;





3.
            Based
      on my knowledge, the financial statements, and other financial information
      included in this report, fairly present in all material respects the
      financial condition, results of operations and cash flows of the
      Registrant as of, and for, the periods presented in this
      report;





4.
            The
      Registrant’s other certifying officers and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant
      and we have:





(a)
            designed
      such disclosure controls and procedures, or caused such disclosure
      controls and procedures to be designed under our supervision, to ensure
      that material information relating to the Registrant, including its
      consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this annual report is
      being prepared;





(b)
            evaluated
      the effectiveness of the Registrant’s disclosure controls and procedures
      and presented in this report our conclusions about the effectiveness of
      the disclosure controls and procedures, as of the end of the period
      covered by this report based on such evaluation;
  and





(c)
            disclosed
      in this report any change in the Registrant’s control over financial
      reporting that occurred during the Registrant’s most recent fiscal quarter
      (the Registrant’s fourth fiscal quarter in the case of an annual report)
      that has materially affected, or is reasonably likely to materially
      affect, the Registrant’s internal control over financial reporting;
      and





5.
            The
      Registrant’s other certifying officers and I have disclosed, based on our
      most recent evaluation of internal control over financial reporting, to
      the Registrant’s auditors and the audit committee of the Registrant’s
      board of directors (or persons performing the equivalent
      functions):





(a)
            all
      significant deficiencies and material weaknesses in the design or
      operation of internal control over financial reporting which are
      reasonably likely to adversely affect the Registrant’s ability to record,
      process, summarize and report financial information;
  and





(b)
            any
      fraud, whether or not material, that involves management or other
      employees who have a significant role in the Registrant’s internal control
      over financial reporting.














/s/
      Michael R. Burwell


_____________________________


Michael
      R. Burwell, President, and


Chief
      Financial Officer of Gymno


Corporation,
      General Partner


March 31,
2008


68


Exhibit
31.3








PRESIDENT’S
CERTIFICATION








I,
Michael R. Burwell, certify that:





1.
            I
      have reviewed this annual report on Form 10-K of Redwood Mortgage
      Investors VIII, a California Limited Partnership (the
      “Registrant”);





2.
            Based
      on my knowledge, this report does not contain any untrue statement of a
      material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      report;





3.
            Based
      on my knowledge, the financial statements, and other financial information
      included in this report, fairly present in all material respects the
      financial condition, results of operations and cash flows of the
      Registrant as of, and for, the periods presented in this
      report;





4.
            The
      Registrant’s other certifying officers and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant
      and we have:





(a)
            designed
      such disclosure controls and procedures, or caused such disclosure
      controls and procedures to be designed under our supervision, to ensure
      that material information relating to the Registrant, including its
      consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this annual report is
      being prepared;





(b)
            evaluated
      the effectiveness of the Registrant’s disclosure controls and procedures
      and presented in this report our conclusions about the effectiveness of
      the disclosure controls and procedures, as of the end of the period
      covered by this report based on such evaluation,
  and





(c)
            disclosed
      in this report any change in the Registrant’s control over financial
      reporting that occurred during the Registrant’s most recent fiscal quarter
      (the Registrant’s fourth fiscal quarter in the case of an annual report)
      that has materially affected, or is reasonably likely to materially
      affect, the Registrant’s internal control over financial reporting;
      and





5.
            The
      Registrant’s other certifying officers and I have disclosed, based on our
      most recent evaluation of internal control over financial reporting, to
      the Registrant’s auditors and the audit committee of the Registrant’s
      board of directors (or persons performing the equivalent
      functions):





(a)
            all
      significant deficiencies and material weaknesses in the design or
      operation of internal control over financial reporting which are
      reasonably likely to adversely affect the Registrant’s ability to record,
      process, summarize and report financial information;
  and





(b)
            any
      fraud, whether or not material, that involves management or other
      employees who have a significant role in the Registrant’s internal control
      over financial reporting.














/s/
Michael R. Burwell


___________________________


Michael
R. Burwell, President,


Redwood
Mortgage Corporation,


General
Partner


March 31,
2008


69


Exhibit
32.1








CERTIFICATION
PURSUANT TO


18 U.S.C
SECTION 1350,


AS
ADOPTED PURSUANT TO


SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002








In
connection with the Annual Report of Redwood Mortgage Investors VIII (the
“Partnership”) on Form 10-K for the period ended December 31, 2007 as filed with
the Securities and Exchange Commission on the date hereof (the “Report”),
pursuant to 18 U.S.C. (S) 1350, as adopted pursuant to (S) 906 of the
Sarbanes-Oxley Act of 2002, I, Michael R. Burwell, certify that to the best of
my knowledge:





(1)
            The
      Report fully complies with the requirements of section 13(a) or 15(d) of
      the Securities Exchange Act of 1934;
and





(2)
            The
      information contained in the Report fairly presents, in all material
      respects, the financial condition and results of operations of the
      partnership at the dates and for the periods
  indicated.





This
      Certification has not been, and shall not be deemed, “filed” with the
      Securities and Exchange Commission.

















/s/
      Michael R. Burwell


_____________________________


Michael
      R. Burwell, General Partner


March
      31, 2008


70





Exhibit
32.2








CERTIFICATION
PURSUANT TO


18 U.S.C
SECTION 1350,


AS
ADOPTED PURSUANT TO


SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002








In
connection with the Annual Report of Redwood Mortgage Investors VIII (the
“Partnership”) on Form 10-K for the period ended December 31, 2007 as filed with
the Securities and Exchange Commission on the date hereof (the “Report”),
pursuant to 18 U.S.C. (S) 1350, as adopted pursuant to (S) 906 of the
Sarbanes-Oxley Act of 2002, I, Michael R. Burwell, certify that to the best of
my knowledge:





(1)
            The
      Report fully complies with the requirements of section 13(a) or 15(d) of
      the Securities Exchange Act of 1934;
and





(2)
            The
      information contained in the Report fairly presents, in all material
      respects, the financial condition and results of operations of the
      partnership at the dates and for the periods
  indicated.





This
      Certification has not been, and shall not be deemed, “filed” with the
      Securities and Exchange Commission.

















/s/
      Michael R. Burwell


_____________________________


Michael
      R. Burwell, President, and


Chief
      Financial Officer of Gymno


Corporation,
      General Partner


March 31,
2008


71


Exhibit
32.3








CERTIFICATION
PURSUANT TO


18 U.S.C
SECTION 1350,


AS
ADOPTED PURSUANT TO


SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002








In
connection with the Annual Report of Redwood Mortgage Investors VIII (the
“Partnership”) on Form 10-K for the period ended December 31, 2007 as filed with
the Securities and Exchange Commission on the date hereof (the “Report”),
pursuant to 18 U.S.C. (S) 1350, as adopted pursuant to (S) 906 of the
Sarbanes-Oxley Act of 2002, I, Michael R. Burwell, certify that to the best of
my knowledge:





(1)
            The
      Report fully complies with the requirements of section 13(a) or 15(d) of
      the Securities Exchange Act of 1934;
and





(2)
            The
      information contained in the Report fairly presents, in all material
      respects, the financial condition and results of operations of the
      partnership at the dates and for the periods
  indicated.





This
      Certification has not been, and shall not be deemed, “filed” with the
      Securities and Exchange Commission.

















/s/
      Michael R. Burwell


___________________________


Michael
      R. Burwell, President,


Redwood
      Mortgage Corporation,


General
      Partner


March
      31, 2008








72