FORM 10-Q
                        SECURITIES & EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                   Quarterly Report Under Section 13 or 15 (d)
                     of the Securities Exchange Act of 1934


For Period Ended                                March 31, 2002
--------------------------------------------------------------------------------
Commission file number                             33-30427
--------------------------------------------------------------------------------

                         REDWOOD MORTGAGE INVESTORS VII
--------------------------------------------------------------------------------
             (exact name of registrant as specified in its charter)

                      California                             94-3094928
--------------------------------------------------------------------------------
           (State or other jurisdiction of                I.R.S. Employer
            incorporation of organization)                Identification No.

               650 El Camino Real, Suite G, Redwood City, CA 94063
--------------------------------------------------------------------------------
                     (address of principal executive office)

                                 (650) 365-5341
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

                                 NOT APPLICABLE
--------------------------------------------------------------------------------
   (Former name, former address and former fiscal year, if changed since last
                                    report)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required 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  reports),  and (2) has been  subject to such
filing requirements for the past 90 days.

YES               XX                                         NO
          -------------------                               --------------------

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS

     Indicate by check mark whether the  registrant  has filed all documents and
reports  required  to be filed by  Sections  12, 13 or 15 (d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court.

YES                     NO                       NOT APPLICABLE              X
-------------------     -----------------        -------------------------------

                      APPLICABLE ONLY TO CORPORATE ISSUERS

     Indicate the number of shares  outstanding of each of the issuer's class of
common stock, as of the latest date.


                                 NOT APPLICABLE





                                       1
<PAGE>




                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                                 BALANCE SHEETS
           MARCH 31, 2002 (unaudited) and DECEMBER 31, 2001 (audited)

                                     ASSETS
                                                 March 31,         December 31,
                                                    2002                2001
                                             ----------------    ---------------
                                                   (unaudited)         (audited)

Cash                                            $  308,148            $  389,844
                                             ----------------    ---------------

Loans
   Loans, secured by deeds of trust,
    held to maturity                             9,899,551            10,091,195
   Loans, unsecured                                139,563               173,731
                                             ----------------    ---------------
                                                10,039,114            10,264,926
   Less allowance for loan losses                (971,187)             (887,578)
                                             ----------------    ---------------
     Net loans                                   9,067,927             9,377,348
                                             ----------------    ---------------

Interest and other receivables
   Accrued interest                                476,046               660,551
   Advances on loans                                22,817                50,665
                                             ----------------    ---------------
     Total interest and other receivables          498,863               711,216
                                             ----------------    ---------------

Real estate owned, held for sale                   671,367               872,133
                                             ----------------    ---------------

     Total assets                             $ 10,546,305          $ 11,350,541
                                             ================    ===============

                        LIABILITIES AND PARTNERS' CAPITAL


Liabilities
   Notes payable - bank line of credit          $ 1,207,000          $ 1,907,000
   Accounts payable                                  43,263               11,295
                                           ----------------     ----------------
     Total liabilities                            1,250,263            1,918,295
                                           ----------------     ----------------

Partners' capital
   Limited partners' capital, subject to
     redemption                                   9,284,064            9,420,268

   General partners' capital                         11,978               11,978
                                           ----------------     ----------------
     Total partners' capital                      9,296,042            9,432,246
                                           ----------------     ----------------

     Total liabilities and  partners'
       capital                                  $10,546,305          $11,350,541
                                           ================     ================





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



                                       2
<PAGE>




                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                              STATEMENTS OF INCOME
    FOR THE THREE MONTHS ENDED MARCH 31, 2002 and MARCH 31, 2001 (unaudited)


                                               THREE MONTHS ENDED MARCH 31,
                                          --------------------------------------
                                                 2002                  2001
                                            --------------        --------------
Revenues
   Interest - on loans                            $373,030              $346,349
   Interest - interest bearing accounts              1,085                    37
   Late charges                                      4,500                   674
   Other income                                     11,307                 2,001
                                            --------------        --------------
                                                   389,922               349,061
                                            --------------        --------------

Expenses
   Mortgage servicing fees                          51,667                21,071
   Interest on note payable - bank                  22,227                72,771
   Clerical costs through Redwood Mortgage Corp.     8,014                10,501
   Asset management fees                             8,881                 9,587
   Provisions for losses on loans
     and real estate acquired through foreclosure   83,609                     -
   Professional services                            16,235                20,848
   Printing, supplies and postage                    1,235                 1,310
   Other                                             1,423                 1,488
                                            --------------        --------------
                                                   193,291               137,576
                                            --------------        --------------

Net income                                        $196,631              $211,485
                                            ==============        ==============

Net income:  To general partners (1%)             $  1,966              $  2,115
             To limited partners (99%)             194,665               209,370
                                            --------------        --------------
                                                  $196,631              $211,485
                                            ==============        ==============

Net income per $1,000 invested by limited
    partners for entire period:
  -where income is reinvested and
      compounded                                       $21                   $21
                                            ==============        ==============

  -where partner receives income in
      monthly distributions                            $21                   $20
                                            ==============        ==============






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



                                       3
<PAGE>

<TABLE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                   STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
            FOR THE YEARS ENDED DECEMBER 31, 2001, and 2000 (audited)
              and THE THREE MONTHS ENDED MARCH 31,2002 (unaudited)

                                                                                                 GENERAL
                                                                                                PARTNERS'
                                                    LIMITED PARTNERS' CAPITAL                    CAPITAL
                                       ----------------------------------------------------   -------------

<S>                                       <C>              <C>               <C>                <C>                <C>
                                          Limited          Formation         Net Limited        General            Total
                                         Partners'            Loan         Partners' Total     Partners'         Partners'
                                         Accounts          Receivable                           Capital           Capital
                                       --------------     -------------    ----------------   -------------    ---------------

Balances at December 31, 1999            $11,162,817        $(165,499)        $10,997,318          $11,978        $11,009,296

   Collections on Formation Loan                   -            79,505             79,505                -             79,505

   Net income                                891,145                              891,145            9,001            900,146

   Early withdrawal penalties               (15,107)            10,382             (4,725)               -            (4,725)

   Partners' withdrawals                 (1,868,913)                 -         (1,868,913)         (9,001)        (1,877,914)
                                       --------------     -------------    ----------------   -------------    ---------------

Balances at December 31, 2000             10,169,942          (75,612)          10,094,330          11,978         10,106,308

   Collections on Formation Loan                                71,460              71,460               -             71,460

   Net income                                812,985                 -             812,985           8,212            821,197

   Early withdrawal penalties                (7,908)             4,152             (3,756)               -            (3,756)

   Partners' withdrawals                 (1,554,751)                 -         (1,554,751)         (8,212)        (1,562,963)
                                       --------------     -------------    ----------------   -------------    ---------------

Balances at December 31, 2001              9,420,268                 0           9,420,268          11,978          9,432,246

   Net income                                194,665                 -             194,665           1,966            196,631

   Early withdrawal penalties                (2,663)                 -             (2,663)               -            (2,663)

   Partners' withdrawals                   (328,206)                 -           (328,206)         (1,966)          (330,172)
                                       --------------     -------------    ----------------   -------------    ---------------

Balances at March 31, 2002                $9,284,064                $0         $ 9,284,064        $ 11,978        $ 9,296,042
                                       ==============     =============    ================   =============    ===============


The accompanying notes are an integral part of these financial statements.
</TABLE>



                                       4
<PAGE>




                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                            STATEMENTS OF CASH FLOWS
          FOR THE THREE MONTHS ENDED MARCH 31, 2002 and 2001(unaudited)

                                                 THREE MONTHS ENDED MARCH 31,
                                              ----------------------------------
                                                  2002                   2001
                                              -------------        -------------
Cash flows from operating activities
  Net income                                  $   196,631             $  211,485
  Adjustments to reconcile net income to net
      cash provided by operating activities
    Provision (gain) for loan losses               83,609                      -

    Early withdrawal penalty credited to income   (2,663)                (1,126)
   Change in operating assets and liabilities
     Accrued interest and advances                176,332               (89,207)
     Accounts payable and accrued expenses         13,040                  7,347
                                             -------------        --------------

Net cash provided by operating activities         466,949                128,499
                                             -------------        --------------
Cash flows from investing activities
    Principal collected on loans                1,040,727              3,336,295
    Loans made                                  (563,714)            (1,336,373)
    Payments for real estate held for sale        (1,801)               (71,590)
    Proceeds from sale of real estate held
      for sale                                      2,565                 31,689
    Proceeds from unsecured loans                   3,750                  3,697
                                             -------------        --------------

Net cash provided by investing activities         481,527              1,963,718
                                             -------------        --------------
Cash flows from financing activities
    Net decrease in note payable-bank           (700,000)            (1,600,000)
    Formation loan collections                          -                 19,498
    Partners withdrawals                        (330,172)              (426,701)
                                             -------------        --------------

Net cash used in financing activities         (1,030,172)            (2,007,203)
                                             -------------        --------------

Net increase (decrease) in cash                  (81,696)                 85,014

Cash - beginning of year                          389,844                269,000
                                             -------------        --------------

Cash - end of year                             $  308,148             $  354,014
                                             =============        ==============

Cash payments for interest                      $  22,227              $  72,771
                                             =============        ==============



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



                                       5
<PAGE>



                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                           MARCH 31, 2002 (unaudited)


NOTE 1 - ORGANIZATION AND GENERAL

     Redwood Mortgage Investors VII, (the "Partnership") is a California Limited
Partnership,  of which the general  partners  are  Michael R.  Burwell and Gymno
Corporation,  a  California  corporation  owned and  operated on an equal 50/50%
basis by Michael R. Burwell and by D. Russell Burwell, a former general partner.
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.,  an
affiliate of the general partners.  At September 30, 1992, the offering had been
closed with contributed capital totaling $11,998,359 for limited partners.

     A  minimum  of 2,500  units  ($250,000)  and a  maximum  of  120,000  units
($12,000,000)  were  offered  through  qualified  broker-dealers.  As loans were
identified, partners were transferred from applicant status to admitted partners
participating in loan  operations.  Each month's income is allocated to partners
based upon their  proportionate  share of partners' capital.  Some partners have
elected to withdraw income on a monthly, quarterly or annual basis.

A. Sales Commissions - Formation Loan

     Sales  commissions  were not paid  directly by the  Partnership  out of the
offering proceeds.  Instead, the Partnership loans to Redwood Mortgage Corp., an
affiliate  of the general  partners,  amounts to pay all sales  commissions  and
amounts payable in connection with unsolicited orders. This loan was referred to
as the "Formation Loan". It was unsecured and non-interest bearing.

     Sales  commissions  ranging from 0% (Units sold by general partners) to 10%
of the gross proceeds were paid by Redwood  Mortgage  Corp., an affiliate of the
general  partners  that  arranges and  services the loans.  To finance the sales
commissions, the Partnership was authorized to loan to Redwood Mortgage Corp. an
amount not to exceed 8.3% of the gross  proceeds  invested  in the  Partnership,
provided that the formation loan for the minimum offering period could be 10% of
the gross proceeds for the minimum offering period. The formation loan was being
repaid,  without  interest,  in ten  installments of principal,  over a ten-year
period commencing  January 1, 1992. At December 31, 1992, Redwood Mortgage Corp.
had borrowed $914,369 from the Partnership to cover sales  commissions  relating
to $11,998,359 limited partner contributions  (7.62%). At December 31, 2001, the
entire  balance  had been  repaid.  The  Formation  Loan,  which was due from an
affiliate of the general  partners',  had been deducted  from limited  partners'
capital in the balance sheet.  As amounts were  collected from Redwood  Mortgage
Corp., the deduction from capital was reduced.

B. Other Organizational and Offering Expenses

     The  Partnership  paid its  syndication  costs,  other than  certain  sales
commissions,  including legal and accounting  expenses,  printing costs, selling
expenses,  and filing fees.  Syndication  costs were charged  against  partners'
capital and are being allocated to the individual  partners  consistent with the
Partnership  Agreement.  Such costs were limited to 10% of the gross proceeds of
the offering or $500,000  whichever was less.  The general  partners were to pay
any amount of such expenses in excess of 10% of the gross proceeds or $500,000.

     Organization  costs of  $10,102  and  syndication  costs of  $415,692  were
incurred by the  Partnership.  The sum of organization  and  syndication  costs,
$425,794,  approximated  3.55% of the gross proceeds  contributed by the limited
partners.  Both the organization and syndication costs have been fully amortized
and allocated to the limited partners.



                                       6
<PAGE>



                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                           MARCH 31, 2002 (unaudited)


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Accrual Basis

     Revenues and expenses are  accounted for on the accrual basis of accounting
wherein  income is recognized as earned and expenses are recognized as incurred.
Once a loan is categorized as impaired,  interest is no longer accrued  thereon.
Any  subsequent  payments  on  impaired  loans are  applied  to the  outstanding
balances on the Partnership's books.

B. Management Estimates

     In  preparing  the  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 balance  sheet date and revenues and expenses
for the related 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 acquired through foreclosure.  Actual results could
differ significantly from these estimates.

C. Loans, Secured by Deeds of Trust

     The  Partnership  has both the  intent  and  ability  to hold the  loans to
maturity, i.e., held for long-term investment. Therefore the loans are valued at
cost for financial statement purposes with interest thereon being accrued by the
effective interest method.

     Financial  Accounting Standards Board Statements (SFAS) 114 and 118 provide
that if the probable  ultimate  recovery of the carrying  amount of a loan, with
due  consideration  for the fair value of collateral,  is less than the recorded
investment,  and related amount due and the impairment is considered to be other
than temporary, the carrying amount of the investment (cost) shall be reduced to
the present value of future cash flows.

     At March 31, 2002, December 31, 2001 and 2000, there were loans categorized
as  impaired  by  the   Partnership   of  $335,454,   $889,439,   and  $890,597,
respectively. In addition, the impaired loans have accrued interest and advances
totaling $18,230, $277,479 and $276,204 at March 31, 2002, December 31, 2001 and
2000,  respectively.  The decrease in carrying  value of the  impaired  loans of
$38,634,  $150,092 and  $137,175 at March 31, 2002,  December 31, 2001 and 2000,
respectively is included in the allowance for loan losses.  The average recorded
investment in the impaired  loans was $612,447,  $890,018,  and $687,563 for the
three months ended March 31,  2002,  and for the years ended  December 31, 2001,
and 2000,  respectively.  During the quarter ended March 31, 2002, and the years
ended  December 31, 2001 and 2000,  $0, $64,987 and $44,999 was received as cash
payments on these loans, respectively.

     As presented in Note 9 to the  financial  statements  as of March 31, 2002,
the  average  loan to  appraised  value of  security  at the time the loans were
consummated at March 31, 2002, December 31, 2001 and 2000 was 62.65%, 60.66% and
60.69%,  respectively.  When  loans are  valued  for  impairment  purposes,  the
allowance  is updated  to reflect  the  change in the  valuation  of  collateral
security.  However,  such a low loan-to-value ratio has the tendency to minimize
reductions for impairment.

D. Cash and Cash Equivalents

     The Partnership  considers all highly liquid  financial  instruments with a
maturity  of  three  months  or  less to be cash  equivalents.  The  Partnership
maintains deposits in financial  institutions that are in excess of amounts that
would be covered by federal insurance. The maximum amount of loss based upon the
deposits  held in the bank that could  result from this risk at March 31,  2002,
December 31, 2001 and 2000,  is  approximately  $397,310,  $678,630 and $69,000,
respectively.



                                       7
<PAGE>



                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                           MARCH 31, 2002 (unaudited)

E. Real Estate Owned, Held for Sale

     Real estate owned,  held for sale,  includes real estate  acquired  through
foreclosure,  and is  stated  at the  lower of the  recorded  investment  in the
property,  net of any senior  indebtedness,  or at the property's estimated fair
value, less estimated costs to sell.

The following schedule reflects the costs of real estate acquired through
foreclosure and the recorded reductions to estimated fair values, less estimated
costs to sell as of March 31, 2002, December 31, 2001 and 2000, not including
real estate in process of acquisition at March 31, 2002:

                                March 31,                  December 31,
                             --------------     --------------------------------
                                  2002               2001               2000
                             --------------     -------------      -------------

Costs of properties              $1,020,562        $1,252,189         $1,258,966
Reduction in value                (349,195)         (380,056)          (442,872)
                             --------------     -------------      -------------
Fair value reflected in
  financial statements            $ 671,367         $ 872,133          $ 816,094
                             ==============     =============      =============

F. Income Taxes

     No provision  for Federal and State  income taxes is made in the  financial
statements  since  income taxes are the  obligation  of the partners if and when
income taxes apply.

G. Allowance for Loan Losses

     Loans and the related accrued interest, fees and advances are analyzed on a
continuous basis for  recoverability.  Delinquencies are identified and followed
as part of the loan  system.  A  provision  is made for bad debt to  adjust  the
allowance for loan losses to an amount  considered by management to be adequate,
with due  consideration  to  collateral  value,  to  provide  for  unrecoverable
accounts receivable, including impaired loans, other loans, accrued interest and
advances on loans.  The composition of the allowance for loan losses as of March
31, 2002, December 31, 2001 and 2000 was as follows:

                              March 31,                  December 31,
                          ---------------     --------------------------------
                               2002               2001               2000
                          ---------------     -------------      -------------
Impaired loans                  $  38,634         $ 150,092          $ 137,175
Unspecified loans                 792,990           593,500            569,612
Unsecured loans                   139,563           143,986            143,761
                          ---------------     -------------      -------------
                                $ 971,187         $ 887,578          $ 850,548
                            ===============     =============      =============

Allowance for loan losses reconciliation:
Activity in the allowance for loan losses is as follows for three months through
March 31, 2002 and for the years ended December 31:

                                March 31,                  December 31,
                            ---------------     --------------------------------
                                  2002               2001               2000
                            ---------------     -------------      -------------
Beginning Balance                  $887,578          $850,548           $828,563
-----------------
Provision for bad debt               83,609            37,371             25,160
Write-off of bad debt                     -             (341)            (3,175)
                            ---------------     -------------      -------------
Ending Balance                     $971,187          $887,578           $850,548
                            ===============     =============      =============




                                       8
<PAGE>



                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                           MARCH 31, 2002 (unaudited)

H. 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 actual amounts  allocated
to limited  partners  who had their  investment  throughout  the period and have
elected to either  leave their  earnings to compound or have  elected to receive
monthly  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 select other options.

I.  Late Fee Revenue

     The Partnership  recognizes  late fee revenue when it is earned.  Late fees
are charged at 6% of the monthly  balance,  and are accrued net of an  allowance
for uncollectible  late fees. For the three months ended March 31, 2002, and for
the years ended December 31, 2001, and 2000, late fee revenue of $4,500, $8,495,
and $11,219, respectively, was recorded.


NOTE 3 - GENERAL PARTNERS AND RELATED PARTIES

     The following are commissions and/or fees which will be paid to the general
partners.

A. Mortgage Brokerage Commissions

     For fees in connection with the review, selection, evaluation,  negotiation
and extension of loans the Partnership  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.  For three months  through March 31, 2002,  and for the years 2001,
and 2000, loan brokerage commissions paid by the borrowers were $3,900, $84,137,
and $130,487, respectively.

B. Mortgage Servicing Fees

     Redwood Mortgage Corp.  receives  monthly mortgage  servicing fees of up to
1/8 of 1% (1.5%  annual) of the unpaid  principal,  or such lesser  amount as is
reasonable and customary in the geographic area where the property  securing the
loan is located. Mortgage servicing fees of $51,667, $94,396, and $110,713, were
incurred  for three  months  through  March 31,  2002,  and for the years  ended
December 31, 2001, and 2000, respectively.

C. Asset Management Fee

     The general  partners  receive monthly fees for managing the  Partnership's
loan  portfolio and operations of up to 1/32 of 1% of the "net asset value" (3/8
of 1% annual).  Management fees of $8,881,  $37,233, and $38,400,  were incurred
for three  months  through  March 31,  2002,  and for the years 2001,  and 2000,
respectively.

D. 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 parties related to the general partners.




                                       9
<PAGE>



                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                           MARCH 31, 2002 (unaudited)

E. Income and Losses

     All income and losses are  credited  or charged to  partners in relation to
their respective partnership interests.  The Partnership interest of the general
partners (combined) is a total of 1%.

F. Operating Expenses

     Redwood Mortgage Corp., an affiliate of the general partners, is 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.
During the three  months  tthrough  March 31,  2002,  and for the years 2001 and
2000, clerical costs totaling $8,014, $38,313, and $27,032,  respectively,  were
reimbursed  to Redwood  Mortgage  Corp.  Such  reimbursements  are  reflected as
expenses in the Statements of Income.

G. General Partners Contributions

     The general  partners  collectively or severally were to contribute 1/10 of
1% in cash  contributions as proceeds from the offering were admitted to limited
partner capital.  As of December 31, 1992 a general partner,  Gymno Corporation,
had  contributed  $11,998,  1/10  of  1% of  limited  partner  contributions  in
accordance with Section 4.02(a) of the Partnership agreement.


NOTE 4 - 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  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.

A. Term of the Partnership

     The term of the  Partnership  is  approximately  40  years,  unless  sooner
terminated as provided. The provisions provide for no capital withdrawal for the
first year.  For years two through  five,  limited  partners may withdraw  their
capital  balance  subject  to the  penalty  provision  set  forth in (D)  below.
Thereafter,  investors  have the right to withdraw over a five-year  period,  or
longer.



                                       10
<PAGE>



                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                           MARCH 31, 2002 (unaudited)

B. Election to Receive Monthly, Quarterly or Annual Distributions

     At subscription,  investors elected either 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.

C. Profits and Losses

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

D. Liquidity, Capital Withdrawals and Early Withdrawals

     There  are  substantial   restrictions  on  transferability  of  Units  and
accordingly an investment in the Partnership is not liquid. Limited partners had
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,  which
in all  instances  had  occurred  as of March 31,  2002.  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  early and will be deducted  from the capital  account.
Withdrawal  after the one-year  holding period and before the five-year  holding
period was permitted only upon the terms set forth above.

     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  (20)  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
(20) 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  account 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.


NOTE 5 - 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.




                                       11
<PAGE>



                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                           MARCH 31, 2002 (unaudited)

NOTE 6 - NOTE PAYABLE BANK - LINE OF CREDIT

     The  Partnership has a bank line of credit secured by its loan portfolio of
up to $3,500,000 at .25% over prime.  The balances  outstanding  as of March 31,
2002,  December 31, 2001 and 2000 were $1,207,000,  $1,907,000,  and $3,500,000,
respectively,  and the interest  rate was 5.0% (4.75% prime + .25%) at March 31,
2002.  This line of credit expires May 1, 2003. The line of credit  requires the
Partnership  to meet certain  financial  covenants.  As of March 31,  2002,  the
Partnership was in compliance with all loan covenants.

     Should the  general  partners  choose not to renew the line of credit,  the
balance would be converted to a three year fully amortized loan.

NOTE 7 - INCOME TAXES

     The following reflects a reconciliation from net assets (Partners' Capital)
reflected in the financial statements to the tax basis of those net assets:

                                      March 31,           December 31,
                                    ------------   -----------------------------
                                        2002           2001            2000
                                    ------------   ------------    -------------

Net assets - partners' capital per
   financial statements              $9,296,042      $9,432,246      $10,106,308

Formation loan receivable                     -               -           75,612
Allowance for loan losses               971,187         887,578          850,548
                                    ------------   -------------   -------------
Net assets tax basis                $10,267,229     $10,319,824      $11,032,468
                                    ============   =============   =============

     In 2001 and  2000,  approximately  68% and 70%,  respectively,  of  taxable
income was allocated to tax exempt  organizations  i.e.,  retirement plans. Such
plans do not have to file income tax returns  unless their  "unrelated  business
income" exceeds $1,000.  Applicable  amounts become taxable when distribution is
made to participants.


NOTE 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) Loans (see note 2 (c)) had a carrying value of $9,899,551,  $10,091,195
and $12,794,297,  at March 31, 2002,  December 31, 2001 and 2000,  respectively.
The fair value of these  investments of $9,508,059,  $10,107,321 and $12,792,716
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.




                                       12
<PAGE>

<TABLE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                           MARCH 31, 2002 (unaudited)

NOTE 9 - ASSET CONCENTRATIONS AND CHARACTERISTICS

The loans are secured by recorded deeds of trust. At March 31, 2002 and at
December 31, 2001 and 2000, there were 34, 36 and 38 loans outstanding,
respectively, with the following characteristics:

                                                                             March 31,                December 31,
                                                                            -------------     -----------------------------
<S>                                                                             <C>               <C>            <C>
                                                                                2002              2001           2000
                                                                            -------------     -------------- --------------
Number of loans outstanding                                                           34                 36             38
Total loans outstanding                                                       $9,899,551        $10,091,195    $12,794,297

Average loan outstanding                                                         291,163            280,311        336,692
Average loan as percent of total                                                   2.94%              2.78%          2.63%
Average loan as percent of partners' capital                                       3.13%              2.97%          3.33%

Largest loan outstanding                                                       1,000,000          1,000,000      1,995,452
Largest loan as percent of total                                                  10.10%              9.91%         15.60%
Largest loan as percent of partners' capital                                      10.76%             10.60%         19.74%

Number of counties where security is located (all California)                         12                 11             11

Largest percentage of loans in one county                                         32.54%             31.92%         29.47%
Average loan to appraised value of security at time loan was consummated          62.65%             60.66%         60.69%

Number of loans in foreclosure                                                         2                  2              -
Amount of loans in foreclosure                                                  $986,372          $ 216,493        $     -

The following categories of loans are pertinent at March 31, 2002, December 31,
2001 and 2000:
</TABLE>
<TABLE>

                                                               March 31,                      December 31,
                                                            ----------------      --------------------------------------
<S>                                                              <C>                   <C>                    <C>
                                                                 2002                  2001                   2000
                                                            ----------------      ----------------       ---------------
First Trust Deeds                                               $ 5,140,449           $ 5,042,062           $ 8,720,986
Second Trust Deeds                                                4,505,664             4,803,146             4,000,140
Third Trust Deeds                                                   253,438               245,987                73,171
                                                            ----------------      ----------------       ---------------
  Total loans                                                     9,899,551            10,091,195            12,794,297
Prior liens due other lenders                                     8,347,243             9,318,486             8,761,363
                                                            ----------------      ----------------       ---------------
  Total debt                                                    $18,246,794           $19,409,681           $21,555,660
                                                            ================      ================       ===============
Appraised property value at time of loan                        $29,126,975           $31,997,080           $35,518,467
                                                            ================      ================       ===============
Total investments as a percent of appraisals                         62.65%                60.66%                60.69%
                                                            ================      ================       ===============
Investments by Type of Property

Owner occupied homes                                             $  824,184            $  622,435            $  218,942
Non-Owner occupied homes                                            996,155             1,435,444             1,644,636
Apartments                                                        1,563,213             1,563,214             2,590,022
Commercial                                                        6,515,999             6,470,102             8,340,697
                                                            ----------------      ----------------       ---------------
                                                                $ 9,899,551           $10,091,195           $12,794,297
                                                            ================      ================       ===============

</TABLE>



                                       13
<PAGE>



                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                           MARCH 31, 2002 (unaudited)

Scheduled maturity dates of loans as of March 31, 2002 are as follows:

                 Year Ending
                December 31,                  Amount
              ------------------        --------------------

                    2002                         $6,642,407
                    2003                            516,223
                    2004                            833,528
                    2005                             40,125
                    2006                            191,831
                 Thereafter                       1,675,437
                                        --------------------
                    Total                       $ 9,899,551
                                        ====================

     The scheduled maturities for 2002 above include approximately $4,549,852 in
10 loans which are past maturity at March 31, 2002.  Although  interest payments
on most of these loans are current,  $954,488 of these loans were categorized as
delinquent over 90 days.

     Three loans with principal outstanding of $335,454 were considered impaired
at March 31, 2002. That is, interest accruals are no longer recorded thereon.

     The cash  balance per bank  statement  at March 31, 2002 of $497,310 was in
one bank with interest bearing balances totaling $144,067. The balances exceeded
FDIC insurance limits (up to $100,000 per bank) by $397,310.  The  Partnership's
main bank is the same financial  institution  that has provided the  Partnership
with the $3,500,000  limit line of credit.  At March 31, 2002, draw down against
this facility was $1,207,000.

Workout Agreements

     The Partnership has negotiated various  contractual 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 March
31, 2002. As of March 31, 2002 the Partnership had  approximately 11 loans under
workout agreements totaling $3,178,001.



                                       14
<PAGE>

<TABLE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                            MARCH 31, 2002 (unaudited

NOTE 10:  SELECTED FINANCIAL INFORMATION (UNAUDITED)

                                                                    Calendar Quarter
                                              --------------------------------------------------------------
<S>                                              <C>             <C>              <C>             <C>              <C>
                                                 First           Second           Third           Fourth           Annual
                                              -------------    ------------    -------------    ------------   -------------
Revenues
      2002                                       $ 389,922               -                -               -                -
      2001                                       $ 349,061         291,342          261,312         290,666        1,192,381
      2000                                       $ 307,831         356,247          362,586         411,300        1,437,964

Expenses
      2002                                       $ 193,291               -                -               -                -
      2001                                       $ 137,576          84,453           58,231          90,924          371,184
      2000                                        $ 74,265         128,581          140,617         194,355          537,818

Net income allocated to general partners
      2002                                        $  1,966               -                -               -                -
      2001                                        $  2,115           2,069            2,031           1,997            8,212
      2000                                        $  2,336           2,276            2,220           2,169            9,001

Net income allocated to limited partners
      2002                                       $ 194,665               -                -               -                -
      2001                                       $ 209,370         204,820          201,050         197,745          812,985
      2000                                       $ 231,230         225,390          219,749         214,776          891,145

Net income per $1,000 invested
   where income is
      Reinvested
      2002                                         $    21               -                -               -                -
      2001                                         $    21          $   21           $   21          $   22           $   85
      2000                                         $    21          $   21           $   21          $   22           $   85

      Withdrawn
      2002                                         $    21               -                -               -                -
      2001                                         $    20          $   20           $   20          $   22           $   82
      2000                                         $    20          $   21           $   20          $   21           $   82

</TABLE>


NOTE 11:  RECENT PRONOUNCEMENTS

     In  October  2001,  the FASB  issued  SFAS  No.  144,  "Accounting  for the
Impairment  or  Disposal  of  Long-Lived  Assets".   SFAS  144  amends  existing
accounting  guidance on asset impairment and provides a single  accounting model
for long-lived assets to be disposed of. Among other  provisions,  the new rules
change the criteria for classifying an asset as held-for-sale. The standard also
broadens the scope of business to be disposed of that  qualify for  reporting as
discontinued  operations,  and changes the timing of recognizing  losses on such
operations.  The  Partnership  will  adopt  SFAS No.  144 in fiscal  year  2002.
Management does not feel that the adoption of this standard will have a material
effect on the Partnership's results of operations or financial position.



                                       15
<PAGE>




            MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

Critical Accounting Policies.

     In  preparing  the  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 balance  sheet date.  Such  estimates  relate
principally  to the  determination  of (1) the allowance  for doubtful  accounts
(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 acquired through foreclosure.

     Loans and related  accrued  interest,  fees, and advances are analyzed on a
continuous basis for  recoverability.  Delinquencies are identified and followed
as part of the loan  system.  Provisions  are made  for bad debt to  adjust  the
allowance for loan losses to an amount  considered by management to be adequate,
with due  consideration  to collateral  values and to provide for  unrecoverable
accounts  receivable,  including impaired loans, other loans,  accrued interest,
late fees and advances on loans, and other accounts receivable (unsecured).

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

Forward Looking Statements

     Some  of  the   information  in  Form  10-Q  may  contain  forward  looking
statements.  Uses of words  such as  "will",  "may".  "anticipate",  "estimate",
"continue",  or other forward  looking  words,  discuss future  expectations  or
predictions. The foregoing analysis of year 2002 issues includes forward-looking
statements  and  predictions  about  possible  or  future  events,   results  of
operations,  and  financial  condition.  As such,  this analysis may prove to be
inaccurate  because of  assumptions  made by the general  partners or the actual
development  of  future  events.  No  assurance  can be given  that any of these
statements or predictions  will ultimately  prove to be correct or substantially
correct.

     On September 30, 1992, the Partnership  had sold  119,983.59  units and its
contributed  capital totaled  $11,998,359 of the approved  $12,000,000 issue, in
units of $100 each. As of that date, the offering was formally closed.  At March
31, 2002, Partners' Capital totaled $9,296,042.

     At March 31, 2002, the Partnership  loans outstanding  totaled  $9,899,551.
This  represents a decline of $191,644  from the December 31, 2001 loans balance
and $2,894,746 from the December 31, 2000 loans balance. This reduction in loans
outstanding  as of March 31, 2002 was chiefly  due to loan  repayments  and loan
pay-offs being used to fund  withdrawals to the limited partners of $328,206 and
$1,554,751  and paydown the credit line  $700,000  and  $1,593,000  during three
months through March 31, 2002,  and twelve months through  December 31, 2001 and
partial reduction in line of credit balance by $2,293,000. The Partnership began
funding loans on December 27, 1989,  and as of March 31, 2002,  had credited the
partners'  accounts with income at an average  annualized  (compounded) yield of
7.86%.

     Since January 2001, the Federal Reserve has been  dramatically  cutting its
core interest rates with eleven successive cuts,  ranging from .25% to .50%. The
latest cut being  December 11,  2001,  which  reduced the Federal  Funds Rate to
1.75%.  In May 2002, the Federal  Reserve met and did not change interest rates.
The effect of the cuts has greatly  reduced  short-term  interest rates and to a
lesser extent reduced long-term  interest rates. New loans will be originated at
then existing  interest rates.  The general partners cannot at this time predict
at what  levels  interest  rates will be in the  future.  The  general  partners
anticipate  that new loans will be placed at rates  approximately  1% lower than
similar loans during the first half of 2001.  The lowering of interest rates has
encouraged  those  borrowers  that hold  higher  interest  rate loans than those
currently  available to seek  refinancing of their existing  obligations to take
advantage of these lower rates.  The  Partnership  may face  prepayments  in the
existing  portfolio  from  borrowers  taking  advantage  of these  lower  rates.
However, demand for loans from qualified borrowers continues to be strong

                                       16
<PAGE>

     and as  prepayments  occur,  we expect to replace these loans with loans at
somewhat  lower interest  rates.  At this time, we believe that the average loan
portfolio  interest rate will decline  approximately .25% to .50% over the year.
Nevertheless,  based upon the rates  expected in  connection  with the  existing
loans,  and anticipated  interest rates to be charged by the Partnership and the
general  partners'   experience,   the  general  partners  anticipate  that  the
annualized  yield will range between  eight and nine percent  (8.00% - 9.00%) in
2002.

     The  Partnership has a line of credit with a commercial bank secured by its
loans to a limit of $3,500,000,  at a variable  interest rate set at one-quarter
percent above the prime rate. As of March 31, 2002, the prime rate was 4.75% and
the line of credit rate was 5.0%. As of March 31, 2002,  December 31, 2001,  and
December 31, 2000, the balances were  $1,207,000,  $1,907,000,  and  $3,500,000,
respectively.  This line of credit expires on May 01, 2003. This added source of
funds helped in maximizing the Partnership  yield by allowing the Partnership to
minimize the amount of funds in lower yield investment accounts when appropriate
loans  are  not  currently  available.  Since  most  of the  loans  made  by the
Partnership  bear  interest at a rate in excess of the rate  payable to the bank
which  extended  the line of credit,  once the required  principal  and interest
payments on the line of credit are paid to the bank,  the loans funded using the
line of credit generate revenue for the  Partnership.  As of March 31, 2002, the
Partnership is current with its interest payments on the line of credit. For the
years ended  December 31, 2000, and 2001, and three month period ended March 31,
2002,  interest  paid was $257,640,  $128,224,  and $22,227,  respectively.  The
somewhat lower interest paid in 2001 and 2002 is reflective of both a lower than
average credit line usage and the lower existing interest rate.

     The  Partnership's  income and  expenses,  accruals and  delinquencies  are
within the normal range of the general partners' expectations,  based upon their
experience in managing similar  partnerships  over the last  twenty-five  years.
Loan servicing fees in 1999 were $127,440,  in 2000 were $110,713,  in 2001 were
$94,396, and during three months through March 31, 2002 were $51,667. These loan
servicing  fees  were  declining  as the  outstanding  mortgage  loan  portfolio
balances  declined  except  for the  quarter  ended  March  31,  2002  when  the
Partnership  collected  some borrower  payments  which were in arrears and hence
paid the loan servicing fees to Redwood  Mortgage Corp.  Asset  Management  Fees
were $38,400,  $37,233,  and $8,881 for the years ended  December 31, 2000,  and
2001,  and during three months through March 31, 2002,  respectively.  The Asset
Management Fee is declining as the Partnership distributes partners' capital.

     All other expenses  fluctuated in a very close range except for Interest on
Note  Payable - bank and  Provision  for Loan  Losses and losses on Real  Estate
Acquired  Through  Foreclosure  each  discussed  elsewhere  in  this  Management
Discussion  and  Analysis of  Financial  Condition  and  Results of  Operations.
Borrower  foreclosures,  as set forth under Results of Operations,  are a normal
aspect of Partnership  operations and the general partners  anticipate that they
will not have a material effect on liquidity. Cash is constantly being generated
from interest earnings,  late charges,  pre-payment  penalties,  amortization of
principal and loan pay-offs.  Currently, cash flow exceeds Partnership expenses,
earnings and 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.

     The general  partners  regularly  review the loan portfolio,  examining the
status of delinquencies,  the underlying  collateral  securing these properties,
the REO expenses and sales activities,  borrowers payment records,  etc. Data on
the local real estate  market and on the national and local economy are studied.
Based upon this  information  and other data,  loss  reserves  are  increased or
decreased.  Because of the number of variables  involved,  the  magnitude of the
possible  swings 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. As of March 31, 2002 we have commenced foreclosure
proceedings  against  two loans.  Of these two  loans,  one has  entered  into a
workout agreement in which monthly payments are being made.  Management provided
$65,664, $37,371, and $83,609, as provisions for loan losses for the years ended
December  31,  2000,  and  2001,  and  three  months  through  March  31,  2002,
respectively. The provision for loan losses was decreased by $263,393 to $65,664
in 2000, and by $28,293 to $37,371 in 2001. As a prudent guard against potential
losses,  the Partnership  increased the provision for loan losses to $83,609 for
the quarter ended March 31, 2002. The total cumulative provision for loan losses
as of March 31, 2002 is $971,187 and 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.

                                       17
<PAGE>

     The Partnership makes loans primarily in Northern  California.  As of March
31,  2002,  approximately  65.51%,   ($6,485,539)  of  the  loans  held  by  the
Partnership  were in the six San Francisco Bay Area  Counties.  The remainder of
the loans held were secured primarily by Northern California real estate outside
the San Francisco Bay Area.  Like the rest of the nation,  the San Francisco Bay
Area has also felt the recession and  accompanying  slow down in economic growth
and increasing  unemployment.  The technology  companies of Silicon Valley,  the
airline  industry,  the tourism  industry and other  industries  are feeling the
effects of the overall United States  recession,  which includes lower earnings,
losses and layoffs.

     The Northern California residential real estate market and particularly the
San Francisco Bay Area residential real estate market  experienced  increases in
values of over 10% in 1999 and 2000, respectively. In 2001, the residential real
estate marketplace  slowed,  this has resulted in longer listing and transaction
times and lower market prices in some segments.  In spite of the U.S. recession,
the California Association of Realtors reported that in March 2002 the statewide
median home price had reached its highest point ever of $305,940 up 18.8% from a
year  earlier  and 6.3%  higher than in February  2002.  It also  reported  that
overall  volume of pre-owned  home sales surged 13.1% from the year earlier.  In
spite  of  these  numbers  the  general  partners  believe  that  lower-end  and
mid-priced homes have continued to increase in value, although at a reduced rate
from 2000,  while high end homes have decreased in value compared to 2001.  This
situation is showing some signs of a turnaround.  Inventories of homes available
for sale have  decreased  sharply  from their  highs in the spring of 2001.  For
example,  the supply of "for sale" homes,  condominiums  and  townhomes in Santa
Clara County peaked the week of May 25, 2001,  at more than 5,700,  according to
Coldwell Banker Northern  California  statistics.  As of January 18, 2002, fewer
than 2,500 homes were "for sale" countywide. Other counties in the San Francisco
Bay Area offer similar  statistics.  The number of  single-family  home sales in
Santa Clara  County was 962 for December  2001 which is the  greatest  number of
homes sold since  records  became  public in 1984.  In Santa Clara  County,  the
median home price hit  $535,000 in March 2002,  up 1.9% from  February  but down
5.3% from March,  2001.  The reduction in  inventories  and the strong sales may
indicate that the buyer's market that prevailed  throughout  most of 2001 may be
coming to an end and may indicate that a recovery is underway.  A  stabilization
of  residential  home  prices  or a  recovery  in home  prices  is good  for the
Partnership  since it depends more heavily than banks and other  similar  credit
type lenders on the value of a property.



                                       18
<PAGE>



     Commercial  property  vacancy  rates have  continued  to climb with the San
Francisco  Bay Area office  market  surpassing  15% as a whole  according  to BT
Commercial  Real Estate and Grubb and Ellis Co. As a result,  rents have dropped
about 40% from last year's highs, giving up nearly all the gains made during the
past three years.  Though  vacancy rates have leaped from 2 percent in the third
quarter of 2000 to 15% at the end of 2001, landlords are bearing only about half
the pain,  since  nearly half the office  space being  offered is for  sublease,
meaning  landlords  generally  are  still  collecting  money  from the  original
tenants.  To the Partnership,  the higher overall vacancy rates may mean that it
experiences greater  delinquencies in its commercial portion of the portfolio if
landlord's  existing leases expire or space becomes  available  through business
failures.

     As of March 31, 2002,  the  Partnership  had an average loan to value ratio
computed as of the date the loan was made of 62.65%.  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  through
amortization  of payments after the loan was made.  This low loan to value ratio
will assist the Partnership in weathering loan  delinquencies  and  foreclosures
should they eventuate.

     The  Partnership's  interest  in land  located  in East Palo  Alto,  CA was
acquired  through  foreclosure.  The  investment  was  previously  classified as
Investment in Partnership in the Financial  Statements and has been reclassified
into Real  Estate  Owned.  The  Partnership's  basis of  $60,841,  $61,837,  and
$38,238,  for the three months  through March 31, 2002,  and for the years ended
December 31, 2001,  and 2000,  respectively,  has been invested with that of two
other  partnerships.  In order to pursue  development  options,  rezoning of the
property's  existing  residential zoning  classification  will be required.  The
Partnership is continuing to explore  remediation  options available to mitigate
the  pesticide  contamination,   which  affects  the  property.  This  pesticide
contamination  appears  to be the  result of  agricultural  operations  by prior
owners. The general partners do not believe at this time that remediation of the
pesticide  contaminants  will have a material  adverse  effect on the  financial
condition of the Partnership.

     The efforts of the general  partners  to  subdivide  the land have met with
success.  The arsenic contaminated portion of the property has been delivered to
the party responsible for the arsenic contamination.  The remaining land will be
made available for development or sale by the Partnership.  The general partners
believe this to be a good result for the Partnership.

     At the time of subscription to the  Partnership,  limited  partners made an
irrevocable decision to either take distributions of earnings monthly, quarterly
or annually or to compound  earnings  in their  capital  account.  For the three
months  through March 31, 2002,  and the years ended December 31, 2001 and 2000,
the  Partnership  made  distributions  of  earnings  to limited  partners  after
allocation   of   syndication   costs  of  $80,447,   $374,689,   and  $454,386,
respectively.  Distribution of Earnings to limited  partners after allocation of
syndication  costs for three months  through  March 31, 2002,  and for the years
ended December 31, 2001 and 2000 to limited  partners'  capital accounts and not
withdrawn was $114,218, $438,296, and $436,759,  respectively. As of December 31
2001 and 2000,  limited partners electing to withdraw  earnings  represented 42%
and 49% of the limited partners' capital.

     The Partnership  also allows the limited partners to withdraw their capital
account  subject  to  certain   limitations  (see   liquidation   provisions  of
partnership  agreement).  For the three months  through March 31, 2002,  and the
years ended December 31, 2001 and 2000, and $33,291, $98,857, and $179,343, were
liquidated  subject to the 10% penalty for early  withdrawal.  These withdrawals
are within the normally anticipated range that the general partners would expect
in their experience in this and other partnerships.  The general partners expect
that a small  percentage  of  limited  partners  will elect to  liquidate  their
capital accounts over one year with a 10% early withdrawal penalty.



                                       19
<PAGE>



     In originally  conceiving the  Partnership,  the general partners wanted to
provide limited  partners  needing their capital returned a degree of liquidity.
Generally, limited partners electing to withdraw over one year need to liquidate
their  investment to raise cash. The trend the  Partnership is  experiencing  in
withdrawals  by  limited  partners  electing  a  one  year  liquidation  program
represents  a small  percentage  of limited  partner  capital as of December 31,
1999,  2000,  2001,  and March 31,  2002,  respectively  and is  expected by the
general partners to commonly occur at these levels.

     Additionally, for the years ended December 31, 2000, 2001, and three months
through March 31, 2002, $1,250,291, $1,089,113, and $217,131, respectively, were
liquidated  by limited  partners who have elected a  liquidation  program over a
period of five years or longer.  This  ability to  withdraw  after five years by
limited  partners has the effect of providing  limited  partner  liquidity.  The
general  partners expect a portion of the limited  partners to take advantage of
this  provision.  This has the anticipated  effect of the  Partnership  growing,
primarily  through  reinvestment  of  earnings in years one  through  five.  The
general partners expect to see increasing numbers of limited partner withdrawals
in years  five  through  eleven,  after  which  time  the bulk of those  limited
partners who have sought  withdrawal  have been  liquidated.  After year eleven,
liquidation  generally  subsides  and the  Partnership  capital  again  tends to
increase.

     Actual  liquidation  of both  capital  and  earnings  from year five (1994)
through year twelve  (2001) and three months  through  March 31, 2002,  is shown
hereunder;  which confirms the general partners theory on the liquidation habits
of the limited partners:

                                      Years ended December 31,

                             Earnings            Capital
                           Liquidation         Liquidation             Total
                         ---------------     ---------------      --------------

       1994                     $263,206           *$340,011            $603,217

       1995                     $270,760           *$184,157            $454,917

       1996                     $336,341           *$722,536          $1,058,877

       1997                     $399,379         *$1,212,916          $1,612,295

       1998                     $456,358         *$1,400,475          $1,856,833

       1999                     $490,841         *$1,436,942          $1,927,784

       2000                     $454,386         *$1,429,634          $1,884,020

       2001                     $374,689         *$1,187,970          $1,562,659

3 months to March 31, 2002      $80,447            *$250,422            $330,869

* These amounts represent gross of early withdrawal penalties.

     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

                                       20
<PAGE>

     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 NASD 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").



                                       21
<PAGE>



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, pages 12-13, under the section "Compensation of the General Partners
and the Affiliates",  which are 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 three months ended March 31, 2002.
All such  compensation  is in compliance with the guidelines and limitations set
forth in the Prospectus.

Entity Receiving
Compensation       Description of Compensation and Services Rendered     Amount
--------------------------------------------------------------------------------

I. Redwood Mortgage   Loan Servicing Fee for servicing loan . . .        $51,667
   Corp.

   General Partners   Asset Management Fee for managing assets . .        $8,881
    &/or Affiliates

   General Partners   1% interest in profits . . . . . . . . . . .        $1,966
                            . . . . . . . . .




     II. FEES PAID BY  BORROWERS  ON LOANS  PLACED BY  COMPANIES  RELATED TO THE
GENERAL  PARTNERS  WITH  THE  PARTNERSHIP  (EXPENSES  OF  BORROWERS  NOT  OF THE
PARTNERSHIP)

  Redwood Mortgage    Mortgage Brokerage Commissions for services in connection
  Corp.               with the review, selection, evaluation, negotiation, and
                      extension of the loan paid by the borrowers and not by the
                      Partnership  .  . . . . . . . . . . . . . .         $3,900

  Redwood Mortgage    Processing and Escrow Fees for services in connection with
  Corp.               notary, document preparation, credit investigation, and
                      escrow fees payable by the borrowers and not by the
                      Partnership . . . . . . . . . . . . . . . .           $450
  Gymno Corporation
  Inc.                Reconveyance Fee . . . . . . . . . . . . .            $125

     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
STATEMENT OF INCOME. . . . . . . . . . . . . . . . . . . . . . .          $8,014





                                       22
<PAGE>



                   LOAN PORTFOLIO SUMMARY AS OF MARCH 31, 2002

                             Partnership Highlights


Loan to Value Ratios

First Trust Deeds                                                $5,140,449.01
Appraised Value of Properties *                                   8,267,090.00
   Total Investment as a % of Appraised Value                           62.18%

First Trust Deed Loans                                           $5,140,449.01
Second Trust Deed Loans                                           4,505,664.11
Third Trust Deed Loans                                              253,437.69
                                                             ------------------
                                                                 $9,899,550.81

First Trust Deeds due other Lenders                               6,869,147.00
Second Trust Deeds due other Lenders                              1,478,096.00
                                                             ------------------

Total Debt                                                      $18,246,793.81
                                                             ==================

   Appraised Property Value *                                   $29,126,975.00
                                                             ==================
   Total Investment as a % of Appraised Value                           62.65%

Number of Loans Outstanding                                                 34

Average Investment                                                 $291,163.26
Average Investment as a % of total loans                                 2.94%
Largest Investment Outstanding                                   $1,000,000.00
Largest Investment as a % of total loans                                10.10%

Loans as a Percentage of Total Loans

First Trust Deed Loans                                                  51.93%
Second Trust Deed Loans                                                 45.51%
Third Trust Deed Loans                                                   2.56%
                                                              -----------------
Total                                                                  100.00%

Loans by Type of Property                  Amount                   Percent

Owner Occupied Homes                    $ 824,183.62                     8.33%
Non Owner Occupied Homes                  996,155.04                    10.06%
Apartments                              1,563,213.50                    15.79%
Commercial                              6,515,998.65                    65.82%
                                    -----------------         -----------------
Total                                  $9,899,550.81                   100.00%

Statement of Conditions of Loans
         Number of loans in Foreclosure              2



*Values used are the appraisal values utilized at the time the loan was
consummated.




                                       23
<PAGE>





Diversification by County

County                                          Total loans          Percent

San Francisco                                 $3,221,042.90           32.54%
Stanislaus                                     2,521,507.80           25.47%
Alameda                                        1,130,004.68           11.41%
Contra Costa                                     965,548.75            9.75%
Santa Clara                                      730,997.78            7.39%
Los Angeles                                      375,000.00            3.79%
San Mateo                                        242,944.66            2.46%
Sacramento                                       231,716.11            2.34%
Marin                                            195,000.00            1.97%
Placer                                           184,608.82            1.86%
Shasta                                            78,394.13             .79%
Sonoma                                            22,785.18             .23%

                                         -------------------      -----------
Total                                         $9,899,550.81          100.00%
                                         ===================      ===========








                                       24
<PAGE>






                                     PART 2
                                OTHER INFORMATION




         Item 1.           Legal Proceedings

                                    The Partnership is a defendant in a legal
                                    action. Please refer to Note 5 of the
                                    Financial Statements.

         Item 2.           Changes in the Securities

                                    Not Applicable

         Item 3.           Defaults upon Senior Securities

                                    Not Applicable

         Item 4.           Submission of Matters to a Vote of Security Holders

                                    Not Applicable

         Item 5.           Other Information

                                    Not Applicable

         Item 6.           Exhibits and Reports on Form 8-K

                           (a)      Exhibits

                                    Not Applicable

(b)      Form 8-K
                                    Form 8-K was filed on February 7, 2000,
                                    relating to a change by the Partnership's
                                    accountants in accounting firms. A Form 8-K
                                    was filed on February 13, 2001, relating to
                                    the subsequent change by the Partnership's
                                    accountants to another accounting firm. On
                                    April 11, 2001, the Partnership filed
                                    another Form 8-K regarding D. Russell
                                    Burwell's retirement. An Amended Form 8-K
                                    was filed on August 3, 2001 regarding the
                                    Partnership's change in Accountants.







                                       25
<PAGE>



                                   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 13th day of May
2002.

REDWOOD MORTGAGE INVESTORS VII


By:       /S/ Michael R. Burwell
          ---------------------------------------------
          Michael R. Burwell, General Partner


By:       Gymno Corporation, General Partner


          By:     /S/ Michael R. Burwell
                  ------------------------------------------------
                  Michael R. Burwell, President,
                  Secretary/Treasurer & Chief Financial Officer


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report has been signed below by the following person on behalf of the registrant
and in the capacity indicated on the 13th day of May 2002.


Signature                               Title                          Date


/S/ Michael R. Burwell
-------------------------
Michael R. Burwell                 General Partner                  May 13, 2002


/S/ Michael R. Burwell
-------------------------
Michael R. Burwell          President, Secretary/Treasurer          May 13, 2002
                            of Gymno Corporation (Principal
                               Financial and Accounting
                              Officer); Director of Gymno
                                     Corporation



                                       26
<PAGE>