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

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


   For Quarterly Period Ended                            March 31, 2003
 -------------------------------------------------------------------------------
     Commission file number                                 33-30427
 -------------------------------------------------------------------------------

        REDWOOD MORTGAGE INVESTORS VII, a California Limited Partnership
 -------------------------------------------------------------------------------
             (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.

              900 Veterans Blvd., Suite 500, 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, 2003 and DECEMBER 31, 2002 (unaudited)

                                     ASSETS
<TABLE>
<S>                                                                      <C>                 <C>
                                                                         March 31,           December 31,
                                                                            2003                 2002
                                                                      -----------------     ----------------

Cash                                                                        $  259,681          $ 1,057,845
                                                                      -----------------     ----------------
Loans
   Loans, secured by deeds of trust                                          7,272,410            6,423,984
   Loans, unsecured                                                            213,174              216,770
                                                                      -----------------     ----------------
                                                                             7,485,584            6,640,754
   Less allowance for loan losses                                            (769,510)            (791,882)
                                                                      -----------------     ----------------
     Net loans                                                               6,716,074            5,848,872
                                                                      -----------------     ----------------
Interest and other receivables
   Accrued interest                                                            366,125              304,936
   Advances on loans                                                            19,405               17,230
                                                                      -----------------     ----------------
     Total interest and other receivables                                      385,530              322,166
                                                                      -----------------     ----------------
Investment in limited liability company                                      1,273,543            1,212,722
                                                                      -----------------     ----------------
Real estate owned, held for sale                                               684,391              683,136
                                                                      -----------------     ----------------
Prepaid expenses                                                                 2,663                    -
                                                                      -----------------     ----------------
     Total assets                                                          $ 9,321,882          $ 9,124,741
                                                                      =================     ================
</TABLE>

                        LIABILITIES AND PARTNERS' CAPITAL
<TABLE>
<S>                                                                        <C>                  <C>

Liabilities
   Line of credit                                                          $   250,000          $         -
   Accounts payable                                                              6,718                2,593
   Payable to affiliate                                                         40,577               32,176
   Deferred interest                                                                 -               37,704
                                                                       ----------------      ---------------
     Total liabilities                                                         297,295               72,473
                                                                       ----------------      ---------------
Partners' capital
   Limited partners' capital, subject to redemption                          9,012,782            9,040,290
   General partners' capital                                                    11,805               11,978
                                                                       ----------------      ---------------
     Total partners' capital                                                 9,024,587            9,052,268
                                                                       ----------------      ---------------
     Total liabilities and partners' capital                               $ 9,321,882          $ 9,124,741
                                                                       ================      ===============
</TABLE>




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, 2003 and 2002 (unaudited)

<TABLE>
<S>                                                                    <C>                 <C>
                                                                          THREE MONTHS ENDED
                                                                               MARCH 31,
                                                                 --------------------------------------

                                                                       2003                 2002
                                                                 -----------------    -----------------
Revenues
   Interest - on loans                                                  $ 164,099            $ 295,152
   Interest - interest bearing accounts                                     1,570                1,085
   Late charges                                                             6,627                4,500
   Other income                                                             1,010               11,307
                                                                 -----------------    -----------------
                                                                          173,306              312,044
                                                                 -----------------    -----------------
Expenses
   Mortgage servicing fees                                                 16,154               51,667
   Interest on note payable - bank                                            169               22,227
   Clerical costs through Redwood   Mortgage Corp.                          6,485                8,014
   Asset management fees                                                    8,517                8,881
   Provisions for losses on loans and real estate                        (22,372)                5,731
   Professional services                                                   17,318               16,235
   Printing, supplies and postage                                           1,586                1,235
   Other                                                                    1,204                1,423
                                                                 -----------------    -----------------
                                                                           29,061              115,413
                                                                 -----------------    -----------------
Net income                                                              $ 144,245            $ 196,631
                                                                 =================    =================

Net income:  To general partners (1%)                                       1,442                1,966
             To limited partners (99%)                                    142,803              194,665
                                                                 -----------------    -----------------
                                                                        $ 144,245            $ 196,631
                                                                 =================    =================

Net income per $1,000 invested by limited partners for
  entire period
    -where income is reinvested and compounded                          $      16            $      21
                                                                 =================    =================
    -where partner receives income in monthly distributions             $      16            $      21
                                                                 =================    =================
</TABLE>


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



                                       3
<PAGE>



                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                            STATEMENTS OF CASH FLOWS
          FOR THE THREE MONTHS ENDED MARCH 31, 2003 and 2002(unaudited)
<TABLE>
<S>                                                                         <C>                    <C>
                                                                           THREE MONTHS ENDED MARCH 31,
                                                                      ----------------------------------------

                                                                            2003                   2002
                                                                       ---------------        ---------------
Cash flows from operating activities
  Net income                                                             $    144,245           $    196,631
  Adjustments to reconcile net income to net cash provided by
      operating activities
  Provision for (recovery of) losses on loans and real estate                (22,372)                  5,731
  Early withdrawal penalty credited to income                                   (755)                (2,663)
  Change in operating assets and liabilities
        Accrued interest and advances on loans                               (63,364)                176,332
        Accounts payable and other liabilities                               (25,178)                 13,040
        Prepaid expenses                                                      (2,663)                      -
                                                                       ---------------        ---------------

Net cash provided by operating activities                                      29,913                466,949
                                                                       ---------------        ---------------
Cash flows from investing activities
  Principal collected on loans                                                446,574              1,040,727
  Loans originated                                                        (1,295,000)              (563,714)
  Payments for real estate held for sale                                      (1,255)                (1,801)
  Proceeds from sale of real estate held for sale                                   -                  2,565
  Investments in limited liability company                                   (60,821)                      -
  Proceeds from unsecured loans                                                 3,596                  3,750
                                                                       ---------------        ---------------

Net cash provided by (used in) investing activities                         (906,906)                481,527
                                                                       ---------------        ---------------
Cash flows from financing activities
  Net increase (decrease) in line of credit                                   250,000              (700,000)
  Partners withdrawals                                                      (171,171)              (330,172)
                                                                       ---------------        ---------------

Net cash provided by (used in) financing activities                            78,829            (1,030,172)
                                                                       ---------------        ---------------

Net decrease in cash                                                        (798,164)               (81,696)

Cash - beginning of year                                                    1,057,845                389,844
                                                                       ---------------        ---------------

Cash - end of period                                                          259,681                308,148
                                                                       ===============        ===============

Cash payments for interest                                               $        169           $     22,227
                                                                       ===============        ===============
</TABLE>


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



                                       4
<PAGE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                           MARCH 31, 2003 (unaudited)


Note 1 - General

     In the  opinion of the  management  of the  Partnership,  the  accompanying
unaudited  financial  statements contain all adjustments,  consisting of normal,
recurring  adjustments,  necessary to present  fairly the financial  information
included therein.  These financial statements should be read in conjunction with
the audited financial statements included in the Partnership's Form 10-K for the
fiscal year ended  December  31,  2002 filed with the  Securities  and  Exchange
Commission. The results of operations for the three month period ended March 31,
2003 are not necessarily  indicative of the operating results to be expected for
the full year.


Note 2 - Summary of Significant Accounting Policies

Loans, secured by deeds of trust

     At March 31, 2003 and  December  31, 2002 there were loans  categorized  as
impaired by the Partnership of $96,716 and $96,716,  respectively.  In addition,
the impaired loans had accrued interest and advances  totaling $7,841 and $7,841
at March 31, 2003 and December 31, 2002, respectively. The reduction in carrying
value of the impaired  loans of $6,620 and $6,620 at March 31, 2003 and December
31,  2002,  respectively,  is included in the  allowance  for loan  losses.  The
average  recorded  investment in the impaired loans was $96,716 and $493,074 for
March 31, 2003 and December 31, 2002, respectively.

     At March 31, 2003 and  December 31, 2002,  the  Partnership  had nine loans
past due 90 days or more totaling  $3,034,446 and $2,913,212  (41.73% and 45.35%
of the secured loan portfolio),  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.

Allowance for loan losses

     The  composition  of the allowance for loan losses as of March 31, 2003 and
December 31, 2002 was as follows:

                                             March 31,           December 31,
                                                2003                 2002
                                           ---------------      ----------------
      Impaired loans                            $   6,620            $    6,620
      Specified loans                             163,731               163,731
      General                                     510,828               533,200
      Unsecured loans                              88,331                88,331
                                           ---------------      ----------------
                                                $ 769,510            $  791,882
                                           ===============      ================

     Activity  in the  allowance  for loan  losses is as  follows  for the three
months ended March 31, 2003 and year ended December 31, 2002:

                                              March 31,           December 31,
                                                 2003                 2002
                                           ---------------      ----------------
      Beginning balance                         $ 791,882            $  887,578
      Provision for loan losses                         -                20,394
      Recoveries                                 (22,372)              (40,433)
      Restructures                                      -              (64,210)
      Write-offs                                        -              (11,447)
                                           ---------------      ----------------
                                                $ 769,510            $  791,882
                                           ===============      ================

                                       5
<PAGE>

                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                           MARCH 31, 2003 (unaudited)


Note 2 - Summary of Significant Accounting Policies (continued)

Income taxes

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

Reclassifications

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

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.


note 3 - General Partners and Related Parties

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

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.  During the three  months  through  March 31,  2003 and 2002,  loan
brokerage   commissions   paid  by  the  borrowers   were  $42,775  and  $3,900,
respectively.

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.  Additional  service fees are recorded  upon the receipt of any
subsequent  payments on impaired loans.  Mortgage  servicing fees of $16,154 and
$51,667  were  incurred for the three  months  through  March 31, 2003 and 2002,
respectively.  The  Partnership  has a payable to  Redwood  Mortgage  Corp.  for
servicing  fees of $40,577 and $32,176 at March 31, 2003 and  December 31, 2002,
respectively.

Asset management fees

     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% annually).  Asset  management  fees of $8,517 and $8,881 were incurred for
the three months through March 31, 2003 and 2002, respectively.




                                       6
<PAGE>



                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                           MARCH 31, 2003 (unaudited)


Note 3 - General Partners and Related Parties (continued)

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.

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  through  March 31, 2003 and 2002,  operating  expenses
totaling $6,485 and $8,014,  respectively,  were reimbursed to Redwood  Mortgage
Corp.


Note 4 - Real Estate Held for Sale

     The following  schedule  reflects the costs of real estate acquired through
foreclosure  and the recorded  reductions  to estimated  fair values,  including
estimated costs to sell as of March 31, 2003 and December 31, 2002:

                                                March 31,          December 31,
                                                  2003                 2002
                                            ----------------     ---------------
      Costs of properties                       $ 1,264,477         $ 1,263,222
      Reduction in value                          (580,086)           (580,086)
                                            ----------------     ---------------
      Real estate held for sale                 $   684,391         $   683,136
                                            ================     ===============


Note 5 - Investment in Limited Liability Company

     As a result of acquiring real property through foreclosure, the Partnership
transferred its interest  (principally land and building) to a limited liability
company ("LLC"), Stockton Street Property Company LLC, which is owned 34% by the
Partnership and 66% by an affiliate.  Development  costs are being  capitalized;
thus,  there was no income or expense  recognized  by Stockton  Street  Property
Company  during the three months  through  March 31, 2003 and year 2002.  During
2002, the LLC completed  construction and now intends to sell the property.  The
Partnership expects to realize a profit from the venture.

     Summarized financial  information of the LLC at March 31, 2003 and December
31, 2002 is as follows:

                                              March 31,           December 31,
                                               2003                  2002
                                          ----------------     -----------------
      Assets                                  $ 1,875,007           $ 1,814,186
      Liabilities                               (601,464)             (601,464)
                                          ----------------     -----------------
      Total                                   $ 1,273,543           $ 1,212,722
                                          ================     =================




                                       7
<PAGE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                           MARCH 31, 2003 (unaudited)


Note 6 - 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,
2003 and December 31, 2002 were $250,000 and $0, respectively; the interest rate
was 4.50% (4.25% prime + .25%) at March 31,  2003.  This line of credit  expires
December 2007 and requires the Partnership to meet certain financial  covenants.
As of March 31, 2003, the Partnership was in compliance with all loan covenants.

     Should the  general  partners  choose not to renew the line of credit,  the
balance then outstanding would be converted to a three-year term loan.


Note 7 - Fair Value of Financial Instruments

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

     Secured loans had a carrying value of $7,272,410 and  $6,423,984,  at March
31, 2003 and December 31, 2002,  respectively.  The fair value of these loans of
$7,088,368 and $6,030,669, 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.


Note 8 - Asset Concentrations and Characteristics

     The loans are  secured by  recorded  deeds of trust.  At March 31, 2003 and
December 31, 2002 there were 26 and 25 secured loans outstanding,  respectively,
with the following characteristics:
<TABLE>
<S>  <C>                                                                  <C>                <C>
                                                                          March 31,          December 31,
                                                                             2003                2002
                                                                        ---------------     ----------------
     Number of secured loans outstanding                                            26                   25
     Total secured loans outstanding                                       $ 7,272,410          $ 6,423,984

     Average secured loan outstanding                                      $   279,708          $   256,959
     Average secured loan as percent of total                                    3.85%                4.00%
     Average secured loan as percent of Partners' capital                        3.09%                2.84%

     Largest secured loan outstanding                                      $ 1,000,000          $ 1,000,000
     Largest secured loan as percent of total                                   13.75%               15.57%
     Largest secured loan as percent of Partners' capital                       11.06%               11.05%
     Number of counties where security is located (all California)                  10                   11

     Largest percentage of loans in one county                                  36.55%               41.38%

     Average secured loan to appraised value of security at time
         loan was consummated                                                   62.11%               65.86%

     Number of secured loans in foreclosure                                          2                    2
     Amount of secured loans in foreclosure                                $   236,807          $   236,807
</TABLE>




                                       8
<PAGE>



                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                           MARCH 31, 2003 (unaudited)


Note 8 - Asset Concentrations and Characteristics (continued)

     The  following  categories of secured loans were held at March 31, 2003 and
December 31, 2002:

                                                March 31,           December 31,
                                                  2003                 2002
                                             --------------       --------------
  First trust deeds                            $ 3,562,581          $ 3,269,897
  Second trust deeds                             3,636,658            2,939,753
  Third trust deeds                                 73,171              214,334
                                             --------------       --------------
         Total loans                             7,272,410            6,423,984
  Prior liens due other lenders                  6,468,369            5,475,725
                                             --------------       --------------

         Total debt                            $13,740,779          $11,899,709
                                             ==============       ==============

  Appraised property value at time of loan     $22,121,579          $18,069,602

  Total investments as percent of appraisals        62.11%               65.86%

  Investments by type of property
       Owner occupied homes                    $   987,386          $ 1,037,474
       Non-owner occupied homes                    575,009              575,051
       Apartments                                1,508,648              708,648
       Commercial                                4,201,367            4,102,811
                                             --------------       --------------
                                               $ 7,272,410          $ 6,423,984
                                             ==============       ==============


     Scheduled  maturity  dates of  secured  loans as of March  31,  2003 are as
follows:


           Year Ending December 31,
      -----------------------------------
                     2003                          $ 3,094,389
                     2004                              711,087
                     2005                              940,125
                     2006                               96,716
                     2007                            1,521,557
                  Thereafter                           908,536
                                               ----------------

                    Total                          $ 7,272,410
                                               ================

     The scheduled maturities for 2003 above include approximately $2,400,534 in
7 loans, which are past maturity at December 31, 2002.  Interest payments on six
of  these  loans  with  an  aggregate   principal  balance  of  $2,266,414  were
categorized as delinquent over 90 days.

     Cash deposits per bank at March 31, 2003 of $210,184 were in one bank.  The
balance  exceeded FDIC  insurance  limits (up to $100,000 per bank) by $110,184.
The Partnership's main bank is the same financial  institution that has provided
the Partnership with the $3,500,000 limit line of credit.

     The Partnership has a substantial amount of its loan receivable balance due
from one borrower.  This borrower  accounted for  approximately  25% of the loan
balance at March 31, 2003.


                                       9
<PAGE>

                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                           MARCH 31, 2003 (unaudited)


Note 9 - Commitments and Contingencies

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,  2003.  As of March 31, 2003 the  Partnership  had two loans  under  workout
agreements totaling $64,999.

Construction loans

     Periodically the Partnership has construction  loans,  which are at various
stages of  completion.  The  Partnership  approves the borrowers up to a maximum
loan  balance;   however,   disbursements  are  made  during  completion  phases
throughout the  construction  process.  At March 31, 2003, all the  construction
loans were paid off.

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.










                                       10
<PAGE>



 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OF THE PARTNERSHIP

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 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 acquired through foreclosure.

     Loans and the related accrued interest, late 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 loan losses 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  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.

     Statement of Financial  Accounting  Standards Nos. 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  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 further
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.

     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 the 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 2003 includes forward looking statements
and predictions  about the  possibility of 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
the future  events.  No assurance  can be given that any of these  statements or
predictions will ultimately prove to be correct or substantially correct.

Related Parties.

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

     o 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, 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. For the three months ended March 31
2003 and 2002,  loan  brokerage  commissions  paid by borrowers were $42,775 and
$3,900, respectively.

                                       11
<PAGE>


     o 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
is 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.  Mortgage  servicing  fees of $16,154 and $51,667 were incurred for the
three months ended March 31, 2003 and 2002, respectively.

     o Asset  Management  Fees The 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 $8,517 and $8,881 were  incurred  by the  Partnership  for the three
months ended March 31, 2003 and 2002, respectively.

     o 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.

     o Income and Losses  All  income  and  losses  are  credited  or charged to
partners in relation to their respective Partnership  interests.  The allocation
to the general partners (combined) shall be a total of 1%.

     o Operating  Expenses An affiliate  of the  Partnership,  Redwood  Mortgage
Corp.,  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. Such reimbursements are reflected as expenses in the statement
of income.

     o  Contributed   Capital  The  general   partners   jointly  and  severally
contributed 1/10 of 1% in cash contributions as proceeds from the offerings were
received  from the limited  partners.  As of March 31, 2003 and 2002,  a general
partner,  Gymno  Corporation,  had contributed  $11,978 as capital in accordance
with Section 4.02(a) of the partnership agreement.

Results of Operations - For the three months ended March 31, 2003 and 2002

     The net income  decrease of $52,386  (26.64%)  for the three  months  ended
March 31,  2003  versus the three  month  period  ended  March 31,  2002 was due
primarily  to a decrease  in  interest  earned on loans of  $131,053(44.4%),  an
increase in interest-interest  bearing accounts of $485 (44.70%), an increase in
late  charges  of $2,127  (47.27%),  and a decrease  in other  income of $10,297
(91.07%) offset by expense increases (decreases).  Significant expense decreases
for the three month period  ended March 31, 2003 versus March 31, 2002  included
lower mortgage servicing fees of $35,513, a decrease in the provision for losses
on loans and real estate of $28,103,  a decrease in interest expense of $22,058,
and an increase in professional fees of $1,083.

     The decrease in interest on loans of $131,053  (44.4%) for the three months
ended March 31, 2003 versus  March 31, 2002 was due  primarily to a reduction of
the loan  portfolio to $7,272,410  from  $9,899,551,  and a reduction in average
portfolio interest rate as compared to the first quarter 2002.

     The decrease in interest on the line of credit of $22,058  (99.24%) for the
three months ended March 31, 2003 versus March 31, 2002 is due to lower  overall
usage of the line of credit  during the first quarter of 2003.  The  Partnership
utilized its bank line of credit less during the first  quarter of 2003 compared
to the first quarter of 2002. The outstanding  balances of $250,000 at March 31,
2003 versus  $1,207,000  at March 31, 2002 are  reflective  of the overall lower
credit  line  usage.  Cash  generated  from  interest  earnings,  late  charges,
amortization  of principal  and loan payoffs was utilized to pay down the credit
line.

     The decrease in mortgage  servicing fees of $35,513  (68.73%) for the three
months ended March 31, 2003 versus March 31, 2002 is  attributable to a decrease
in loan portfolio to $7,272,410 from  $9,899,551.  In addition,  higher mortgage
servicing  fees  during  the three  months  through  March  31,  2002 was due to
collection of servicing fees on impaired loans during the first quarter of 2002.
The  Partnership  does not accrue  servicing  fees to Redwood  Mortgage Corp. on
impaired  loans.  Rather,  servicing  fees on  impaired  loans are  incurred  as
borrower payments are received.

                                       12
<PAGE>

     Loan loss recoveries of $22,372  occurred during the first quarter of 2003.
No further  provision  was made as the general  partners felt that the allowance
for loan  losses of  $769,510  as of March 31,  2003 was more than  adequate  to
offset any potential loss in loans or real estate.

     The decrease in asset  management fees of $364 (4.10%) for the three months
ended March 31, 2003 versus the respective period ended March 31, 2002 is due to
a decrease in the partners'  capital under management at March 31, 2003 and 2002
of $9,024,857 and $9,296,042, respectively.

     The increase in  professional  fees of $1,083  (6.67%) for the three months
ended March 31, 2003 versus March 31, 2002 is due to timing of services provided
in 2003 compared to 2002 in relation to its audit and tax return processing.

     Partnership  capital  continued to decrease as the limited partners capital
declined due to both earnings  distribution  and capital  liquidations.  For the
three months ended March 31, 2003  earnings and capital  liquidated  was $57,158
and $113,151,  respectively  versus $80,447 and $250,422,  respectively  for the
corresponding period in 2002.

     At March 31, 2003, outstanding foreclosures remained at two ($236,807) from
the two  ($986,372)  that existed at March 31, 2002.  These  foreclosures  are a
reflection of the difficult economic times at March 31, 2003 and March 31, 2002,
yet are not unusual in the general partners' experience and we do not anticipate
a reduction in net income due to these foreclosures.

     The general partners received Mortgage Brokerage  Commissions from the loan
borrowers  of $42,775 for the three  months  ended March 31, 2003 as compared to
$3,900 for the three months  ended March 31,  2002.  The increase is due to more
loans written in the three months ended March 31, 2003.

     During  2001,  and through  March 31,  2003,  the Federal  Reserve  reduced
interest  rates by cutting the Federal  Funds Rate  twelve  times to 1.25%.  The
effect of the previous cuts has greatly reduced short-term interest rates and to
a  lesser  extent  reduced  long-term   interest  rates.  The  general  partners
anticipate  that new loans  will be placed  at rates  approximately  1% to 1.50%
lower than similar loans during early 2002.  The lowering of interest  rates has
encouraged  those  borrowers that have mortgages with higher interest rates than
those  currently  available  to  seek  refinancing  of  their  obligations.  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 and as prepayments occur, the general partners
expect to replace paid off loans with loans at somewhat lower interest rates. At
this time, the general partners believe that the average loan portfolio interest
rate will decline  approximately .50% to .75% over the year 2003.  Nevertheless,
based  upon the  rates  payable  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 6.75% and 7.30% in 2003.

     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.  As of March 31, 2003,  there
were two properties in foreclosure.  The principal amount of these  foreclosures
was $236,807.  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.



                                       13
<PAGE>


Allowance for Losses.

     The general  partners  regularly  review the loan portfolio,  examining the
status of delinquencies,  the underlying  collateral  securing these properties,
the real estate held for sale 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.  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.  During 2001, and continuing in
2002 and 2003,  the  Northern  California  real  estate  market  slowed  and the
national and local economies have slipped into recession.  As of March 31, 2003,
two notices of default are currently  filed beginning the process of foreclosing
two additional  loans.  The principal  amounts of the two foreclosed loans total
$236,807 or 3.26% of our loan  portfolio.  The  Partnership  also  entered  into
workout  agreements  with borrowers who are past maturity or delinquent in their
regular  payments.  The  Partnership had workout  agreements on  approximately 2
loans  totaling  $64,999 as of March 31, 2003.  Typically,  a workout  agreement
allows the  borrower  to extend the  maturity  date of the  balloon  payment and
allows the borrower to make current monthly payments while deferring for periods
of time,  past  due  payments,  or  allows  time to pay the loan in full.  These
workout agreements and foreclosures generally exist within our loan portfolio to
greater or lesser degrees, depending primarily on the health of the economy. The
number of foreclosures  and workout  agreements will rise during difficult times
and  conversely  fall  during  good  economic  times.  The  number and amount of
foreclosures and workout agreements  existing at March 31, 2003, in management's
opinion,  does not have a  material  effect  on our  results  of  operations  or
liquidity.  These workouts and foreclosures have been considered when management
arrived at  appropriate  loan loss  reserves  and based on our  experience,  are
reflective of our loan marketplace  segment.  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.  Management
provided ($22,372) and $5,731, as provisions for losses on loans and real estate
for the three  months ended March 31, 2003 and 2002,  respectively.  The reserve
for losses on loans and real  estate had a balance of  $769,510  as of March 31,
2003. This balance  reflects  reduced  expected loan or real estate  anticipated
losses in 2003 and that  current  reserves  are  adequate  to  handle  potential
losses. If conditions  change, the Partnership may again increase its provisions
for loan and real estate losses.

     The Partnership makes loans primarily in Northern  California.  As of March
31,  2003,  approximately  57.77%,   ($4,201,144)  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 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.

     As of March 31, 2003,  the  Partnership  had an average loan to value ratio
computed as of the date the loan was made of 62.11%.  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.


PORTFOLIO REVIEW - For the three months ended March 31, 2003 and 2002.

Loan Portfolio

     The Partnership's  loan portfolio  consists primarily of short-term (one to
five years),  fixed rate loans secured by real estate.  As of March 31, 2003 and
2002 the Partnership's  loans secured by real property collateral in the six San
Francisco Bay Area counties (San  Francisco,  San Mateo,  Santa Clara,  Alameda,
Contra Costa, and Marin) represented $4,201,144 (57.77%) and $6,485,539 (65.51%)
of the outstanding  loan portfolio.  The remainder of the portfolio  represented
loans secured by real estate located primarily in Northern California.

                                       14
<PAGE>

     As of March 31, 2003,  approximately 21.48%  ($1,562,396),  was invested in
loans  secured  by  single  family  homes  (1-4  units),   approximately  20.75%
($1,508,648), was invested in loans secured by multifamily dwellings (apartments
over 4 units), approximately 28.11% ($2,044,309),  was invested in loans secured
by commercial properties,  and approximately 29.66% ($2,157,057) was invested in
loans secured by land. As of March 31, 2002,  approximately 18.39% ($1,820,339),
was invested in loans secured by single family homes (1-4 units),  approximately
15.79%  ($1,563,213)  was  invested in loans  secured by  multifamily  dwellings
(apartments  over 4 units),  approximately  39.65%  ($3,924,789) was invested in
loans secured by commercial  properties,  and approximately  26.17% ($2,591,210)
was invested in loans secured by land.

     As of March 31, 2003,  the  Partnership  held 26 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 March 31, 2003:


            PRIORITIES, ASSET CONCENTRATIONS AND MATURITIES OF LOANS
                              As of March 31, 2003

                               # of Loans           Amount             Percent
                              -------------     --------------      ------------

 1st Mortgages                         13          $3,562,581               49%
 2nd Mortgages                         12           3,636,658               50%
 3rd Mortgages                          1              73,171                1%
                              ============      ==============      ============
   Total                               26          $7,272,410              100%

 Maturing 12/31/03 and prior           13          $3,094,389               43%
 Maturing prior to 12/31/04             3             711,087               10%
 Maturing prior to 12/31/05             2             940,125               13%
 Maturing after 12/31/05                8           2,526,809               34%
                              ============      ==============      ============
   Total                               26          $7,272,410              100%

 Average Loan                                       $ 279,708                4%
 Largest Loan                                       1,000,000               14%
 Smallest Loan                                         11,373             0.16%
 Average Loan-to-Value                                                      62%


Borrower Liquidity and Capital Resources.

     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 ended March 31, 2003 and 2002,  the  Partnership  made  distributions  of
earnings to limited partners of $57,158 and $80,447, respectively.  Distribution
of Earnings to limited  partners,  which were not withdrawn for the three months
ended March 31, 2003 and 2002 were  $85,645 and  $114,218,  respectively.  As of
March  31,  2003 and  2002,  limited  partners  electing  to  withdraw  earnings
represented 37%and 42% 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  ended  March 31, 2003 and 2002,
$9,440  and  $33,291  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. 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 March 31, 2003 and 2002, respectively.

                                       15
<PAGE>


     Additionally,  for the three months ended March 31, 2003 and 2002, $103,711
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.

     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 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").

Current Economic Conditions.

     As contained in a collection  of real estate  statistics  listed in the San
Francisco  Chronicle  dated  February  21,  2003,  Bay Area home sales slowed in
January but prices rose. The article  stated,  "The torrid pace of home sales in
the Bay Area cooled  slightly in January,  but the median  price  year-over-year
rose nearly 9 %, a real estate information firm said Thursday.  The median price
of a house in the nine-county Bay Area was $404,000 in January, up 8.9% from the
year-ago median of $371,000, but down 2.9% from the December median of $416,000.
Last  summer,  the Bay Area median  reached an all-time  high of  $417,000.  The
median is the  midpoint;  half of the sales  prices in the month  were below and
half were above $404,000.  A total of 6,944 houses and condos sold last month in
the nine counties,  down 0.7% from the 6,990 sold in January 2002. Sales dropped
19% in Napa, 2.1% in San Francisco and 7.6% in Santa Clara.

     Researchers  at  DataQuick  in La Jolla  (San Diego  County)  said the drop
reflects  stronger-than-expected sales in January 2002, when buyers who had fled
the market after September 11 terrorist  attacks  returned,  prompted largely by
falling  interest rates.  The January 2002 sales figure was the highest for that
month in a decade.  `Everyone  put things on hold (after Sept.  11), and several
months later, people jumped back in,' said John Karevoll,  DataQuick researcher.
Although  sales fell 19% in Napa County,  the median price there jumped 31.1% to
$405,000 - though Karevoll pointed out the county routinely has the fewest sales
per month.  In San  Francisco,  the median  price rose 8.5% to  $539,000.  Santa
Clara,  hit hard by the dot-com bust, saw the smallest rise in median home price
- up 4.9% to $447,000. Economists are keeping a close eye on the housing market,
one of the few bright sectors in an otherwise  stormy economy.  To some pundits,
the Bay Area market,  in  particular,  has raised red flags  because home prices
have continued to rise despite widespread  layoffs and a beleaguered  technology
sector."


                                       16
<PAGE>
<TABLE>
<S>                            <C>           <C>            <C>            <C>              <C>              <C>

                                                January Home Sales
 ------------------------------------------------------------------------------------------------------------------

                               Sold*         Sold*          Pct.           Median           Median           Pct.
                              Jan. 02       Jan. 03        Change          Jan. 02         Jan. 03          Change
                             ----------    ----------    ------------    ------------    -------------    -----------
Alameda                          1,478         1,471           -0.5%        $358,000         $392,000           9.5%
Contra Costa                     1,319         1,392             5.5         309,000          355,000           14.9
Marin                              259           269             3.9         502,000          535,000            6.6
Napa                               163           132           -19.0         309,000          405,000           31.1
San Francisco                      375           367            -2.1         497,000          539,000            8.5
San Mateo                          581           541            -6.9         478,000          507,000            6.1
Santa Clara                      1,635         1,510            -7.6         426,000          447,000            4.9
Solano                             601           658             9.5         238,000          276,000           16.0
Sonoma                             579           604             4.3         297,000          343,000           15.5
Bay Area                         6,990         6,944            -0.7         371,000          404,000            8.9
</TABLE>

*Sales include new and existing houses and condos.
Source: DataQuick Information Systems, www.dqnews.com

     For the  Partnership,  these  statistics imply that the values of the homes
secured by  mortgages  should  remain firm and assist in reducing  losses if the
take back of collateral through the foreclosure process should eventuate.

     In spite of the slowing economy,  commercial  lending  opportunities  exist
which the Partnership may advantage itself of.

     According  to the San  Francisco  Business  Times of the week of January 3,
2003,  the real estate  market  took its first steps on the long road back.  The
article states,  "After back-to-back  terrible years, the mere fact that 2003 is
not likely to be worse counts as good news. The market seems to be at the bottom
of the bottom and it may see a slight improvement in 2003. None of real estate's
highly paid crystal ballers, including University of California,  Berkeley's Ken
Rosen,  is  predicting  major   improvement  in  2003  because  they  don't  see
significant  job  creation.  The  uncertainty  of  war in the  Middle  East  and
continuing problems in high tech and travel, meanwhile, conspire to keep the lid
on chances for a major  recovery in 2003.  That doesn't mean that there won't be
major  lease  deals.   Orrick   Herrington  &  Sutcliffe   will  likely  sign  a
150,000-square-foot  lease in San  Francisco  at  either  Foundry  Square or 400
Sansome Street that will have more value than any lease signed  throughout  2002
anywhere in the region.

     Commercial  vacancy in San  Francisco  hovers  around 20% while down on the
harder hit Peninsula it is closer to 25%. Nobody dares calculate  shadow space -
those canyons of empty  cubicles that  corporations  aren't using or subleasing.
That space has to fill before  companies  absorb new space,  a factor  likely to
further delay any recovery.  New office building,  which tends to lag a recovery
in the  leasing  market,  is still  several  years away,  barring  some plans by
government agencies. `It will be another lean year with some pockets of activity
in  non-cyclical  areas such as the  nonprofits,'  said Dave Klein,  senior vice
president of BT  Commercial.  `Education  and  nonprofits  will suck up a lot of
space,  but demand from the big corporate office users will still be soft. We're
at the bottom of the bottom now and after 10  consecutive  quarters  of negative
absorption we could see some slight positive  absorption by the end of the first
quarter.'

     Major  foreclosures  have been  noticeably  absent thus far in the downturn
thanks to microscopic  interest  rates.  If landlords  continue to have to carry
empty buildings, bankruptcy courts could see more activity this year.

     To the Partnership,  stabilizing  vacancy rates may mean that we are at the
vacancy rate bottom.  High levels of space exist,  and as tenant  leases  expire
they may be able to negotiate lower rental rates.  This could lead to lower cash
flows for owners,  which may mean we could  experience  higher  foreclosures  or
delinquencies.



                                       17
<PAGE>




           Quantitative and Qualitative Disclosures About Market Risk

     The  following  table  contains  information  about  the cash held in money
market accounts,  secured loans held in the  Partnership's  portfolio and a note
payable on our line of credit as of March 31, 2003. The  presentation,  for each
category of information, aggregates the assets and liabilities by their maturity
dates for  maturities  occurring  in each of the  years  2003  through  2007 and
separately aggregates the information for all maturities arising after 2007. The
carrying  values of these assets and liabilities  approximate  their fair market
values as of March 31, 2003:
<TABLE>
<S>                                 <C>           <C>         <C>         <C>         <C>       <C>             <C>
                                    2003          2004        2005        2006        2007      Thereafter      Total
                                -------------- ----------- ----------- ----------- ------------ ------------ -------------
Interest earning assets:
Money market accounts              $    3,020                                                                  $    3,020
Average interest rate                   1.00%                                                                       1.00%
Loans secured by deeds
   of trust                        $3,094,390     711,086     940,125      96,716    1,521,557      908,536    $7,272,410
Average interest rate                  11.22%      10.46%       9.87%       6.50%        8.13%        8.73%         9.95%
Interest bearing
   liabilities:
Line of credit                     $  250,000                                                                  $  250,000
Average interest rate                   4.50%                                                                       4.50%
</TABLE>

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 note payable.  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.

     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 (100% as of
March 31, 2003) 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.

Controls and Procedures.

     Within the 90 days prior to the date of this report, the general partner of
the  Partnership  carried out an evaluation,  under the supervision and with the
participation  of  the  general  partner's  management,  including  the  general
partner's  President and Chief Financial  Officer,  of the  effectiveness of the
design and operation of the  Partnership's  disclosure  controls and  procedures
pursuant to Exchange Act Rule 13a-14. Based upon that evaluation,  the President
and  Chief  Financial   Officer  of  the  general  partner  concluded  that  the
Partnership's  disclosure  controls and procedures are effective.  There were no
significant  changes in the Partnership's  internal controls or in other factors
that could  significantly  affect these controls subsequent to the date of their
evaluation.


                                       18
<PAGE>

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.

     The conclusion that 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 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 loan losses of the Partnership. As of
March 31, 2003 the general  partners have determined that the allowance for loan
losses of $769,510  (8.5% 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.  As of March 31, 2003, 9 loans were  delinquent over 90 days amounting
to $3,034,446.



                                       19
<PAGE>




       COMPENSATION OF THE GENERAL PARTNERS AND AFFILIATES BY PARTNERSHIP


     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 part of Form S-11 and subsequent  amendments  related to the offering
of Partnership  interests,  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, 2003.
All such  compensation  is in compliance with the guidelines and limitations set
forth in the Prospectus.
<TABLE>
<S>                               <C>                                                              <C>

Entity Receiving
Compensation                      Description of Compensation and Services Rendered                Amount
-------------------------------------------------------------------------------------------------------------
I.  Redwood Mortgage Corp.      Loan Servicing Fee for servicing loan ...............................$16,154

    General Partners
       &/or Affiliates          Asset Management Fee for managing assets .............................$8,517

    General Partners            1% interest in profits ...............................................$1,442

</TABLE>

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)

<TABLE>
<S>                            <C>                                                                        <C>

Redwood Mortgage Corp.         Mortgage Brokerage Commissions for services in connection with
                               the review, selection, evaluation, negotiation, and extension of the
                               loan paid by the borrowers and not by the Partnership......................$42,775

Redwood Mortgage Corp.         Processing and Escrow Fees for services in connection with notary,
                               document preparation, credit investigation, and escrow fees paid by
                               the borrowers and not by the Partnership .....................................$987

Gymno Corporation, Inc.        Reconveyance Fee..............................................................$180
</TABLE>


     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 . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,485




                                       20
<PAGE>



                                     PART 2
                                OTHER INFORMATION


 Item 1.      Legal Proceedings

                 The Partnership periodically is a defendant in various legal
                 actions. Please refer to Note 9 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

                     (99.1) Certification of Michael R. Burwell, General Partner

                     (99.2) Certification of Michael R. Burwell, President,
                            Secretary/Treasurer & Chief Financial Officer of
                            Gymno Corporation, General Partner

                 (b) Form 8-K

                     Not Applicable





                                       21
<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 15th day of May
2003.


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 15th day of May 2003.


       Signature                        Title                          Date


/S/ Michael R. Burwell
------------------------
Michael R. Burwell                 General Partner                 May 15, 2003


/S/ Michael R. Burwell
------------------------
Michael R. Burwell          President, Secretary/Treasurer         May 15, 2003
                            of Gymno Corporation (Principal
                               Financial and Accounting
                              Officer); Director of Gymno
                                      Corporation




                                       22
<PAGE>


                                                                   Exhibit 99.1


                          GENERAL PARTNER CERTIFICATION


I, Michael R. Burwell, General Partner, certify that:

     1. I have reviewed this quarterly  report on Form 10-Q of Redwood  Mortgage
Investors VII, a California Limited Partnership (the "Registrant");

     2. Based on my knowledge, this quarterly 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 quarterly
report;

     3. Based on my knowledge,  the financial  statements,  and other  financial
information  included in this quarterly  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 quarterly 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-14 and 15d-14) for the Registrant and we have:

     (a)  designed  such  disclosure  controls  and  procedures  to ensure  that
material  information  relating  to  the  Registrant,   is  made  known  to  us,
particularly during the period in which this quarterly report is being prepared;

     (b) evaluated the effectiveness of the Registrant's disclosure controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

     (c)  presented  in  this  quarterly   report  our  conclusions   about  the
effectiveness of the disclosure  controls and procedures based on our evaluation
as of the Evaluation Date.

     5. The Registrant's other certifying  officers and I have disclosed,  based
on our most  recent  evaluation,  to the  Registrant's  auditors  and the  audit
committee  of  Registrant's  board  of  directors  (or  persons  performing  the
equivalent function):

     (a) all  significant  deficiencies  in the design or  operation of internal
controls  which  could  adversely  affect  the  Registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
Registrant's auditors any material weaknesses in internal controls; and

     (b) any fraud,  whether or not material,  that involves management or other
employees who have a significant role in the Registrant's internal controls.

     6. The Registrant's other certifying  officers and I have indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.



/s/ Michael R. Burwell
-----------------------------------
Michael R. Burwell, General Partner
May 15, 2003



                                       23
<PAGE>


                                                                   Exhibit 99.1


                            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 Quarterly Report of Redwood  Mortgage  Investors VII
(the  "Partnership")  on Form 10-Q for the period ending March 31, 2003 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,  General  Partner of the
Partnership, 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.


/s/ Michael R. Burwell
-----------------------------
Michael R. Burwell, General Partner
May 15, 2003





                                       24
<PAGE>



                                                                   Exhibit 99.2


               PRESIDENT AND CHIEF FINANCIAL OFFICER CERTIFICATION

     I,  Michael R.  Burwell,  President  and Chief  Financial  Officer of Gymno
Corporation, General Partner, certify that:

     1. I have reviewed this quarterly  report on Form 10-Q of Redwood  Mortgage
Investors VII, a California Limited Partnership (the "Registrant");

     2. Based on my knowledge, this quarterly 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 quarterly
report;

     3. Based on my knowledge,  the financial  statements,  and other  financial
information  included in this quarterly  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 quarterly 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-14 and 15d-14) for the Registrant and we have:

     (a)  designed  such  disclosure  controls  and  procedures  to ensure  that
material  information  relating  to  the  Registrant,   is  made  known  to  us,
particularly during the period in which this quarterly report is being prepared;

     (b) evaluated the effectiveness of the Registrant's disclosure controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

     (c)  presented  in  this  quarterly   report  our  conclusions   about  the
effectiveness of the disclosure  controls and procedures based on our evaluation
as of the Evaluation Date.

     5. The Registrant's other certifying  officers and I have disclosed,  based
on our most  recent  evaluation,  to the  Registrant's  auditors  and the  audit
committee  of  Registrant's  board  of  directors  (or  persons  performing  the
equivalent function):

     (a) all  significant  deficiencies  in the design or  operation of internal
controls  which  could  adversely  affect  the  Registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
Registrant's auditors any material weaknesses in internal controls; and

     (b) any fraud,  whether or not material,  that involves management or other
employees who have a significant role in the Registrant's internal controls.

     6. The Registrant's other certifying  officers and I have indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.



/s/ Michael R. Burwell
---------------------------------
Michael R. Burwell, President and
Chief Financial Officer of Gymno
Corporation, General Partner
May 15, 2003



                                       25
<PAGE>



                                                                   Exhibit 99.2


                            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 Quarterly Report of Redwood  Mortgage  Investors VII
(the  "Partnership")  on Form 10-Q for the period ending March 31, 2003 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,    President,
Secretary/Treasurer  & Chief  Financial  Officer of Gymno  Corporation,  General
Partner of the Partnership, 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.


/s/ Michael R. Burwell
-------------------------------------------
Michael R. Burwell, President,
Secretary/Treasurer & Chief Financial
Officer of Gymno Corporation, General Partner
May 15, 2003


                                       26