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                         June 30, 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


<PAGE>



                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                                 BALANCE SHEETS
            JUNE 30, 2002 (unaudited) and DECEMBER 31, 2001 (audited)

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

                                                                               June 30,           December 31,
                                                                                 2002                 2001
                                                                            ----------------     ----------------
                                                                              (unaudited)           (audited)

Cash                                                                             $  378,074           $  389,844
                                                                            ----------------     ----------------

Loans
   Loans, secured by deeds of trust, held to maturity                             9,522,503           10,091,195
   Loans, unsecured                                                                 135,813              173,731
                                                                            ----------------     ----------------
                                                                                  9,658,316           10,264,926
   Less allowance for loan losses                                                 (971,187)            (887,578)
                                                                            ----------------     ----------------
     Net loans                                                                    8,687,129            9,377,348
                                                                            ----------------     ----------------

Interest and other receivables
   Accrued interest                                                                 272,716              660,551
   Advances on loans                                                                 76,544               50,665
                                                                            ----------------     ----------------
     Total interest and other receivables                                           349,260              711,216
                                                                            ----------------     ----------------

Real estate owned, held for sale                                                    672,588              872,133

Prepaid expense                                                                       9,983                    -
                                                                            ----------------     ----------------

     Total assets                                                              $ 10,097,034         $ 11,350,541
                                                                            ================     ================


                        LIABILITIES AND PARTNERS' CAPITAL

Liabilities
   Notes payable - bank line of credit                                            $ 907,000          $ 1,907,000
   Accounts payable                                                                   4,102               11,295
                                                                            ----------------     ----------------
     Total liabilities                                                              911,102            1,918,295
                                                                            ----------------     ----------------

Partners' capital
   Limited partners' capital, subject to redemption                               9,173,954            9,420,268

   General partners' capital                                                         11,978               11,978
                                                                            ----------------     ----------------
     Total partners' capital                                                      9,185,932            9,432,246
                                                                            ----------------     ----------------

     Total liabilities and  partners' capital                                   $10,097,034          $11,350,541
                                                                            ================     ================


</TABLE>


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


<PAGE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                              STATEMENTS OF INCOME
 FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2002 and JUNE 30, 2001 (unaudited)
<TABLE>
<S>                                                  <C>               <C>                     <C>                <C>


                                                        SIX MONTHS ENDED                          THREE MONTHS ENDED
                                                            JUNE 30,                                   JUNE 30,
                                                 --------------------------------          ---------------------------------
                                                     2002              2001                    2002               2001
                                                 -------------     --------------          --------------    ---------------
Revenues
   Interest - on loans                               $646,215           $632,044                $273,185           $285,695
   Interest - interest bearing accounts                 1,780              2,411                     695              2,374
   Late charges                                         5,849              3,084                   1,349              2,410
   Other income                                        14,726              2,864                   3,419                863
                                                 -------------     --------------          --------------    ---------------
                                                      668,570            640,403                 278,648            291,342
                                                 -------------     --------------          --------------    ---------------

Expenses
   Mortgage servicing fees                             96,325             39,826                  44,658             18,755
   Interest on note payable - bank                     34,593             92,199                  12,366             19,428
   Clerical costs through Redwood                      15,688             20,379                   7,674              9,878
     Mortgage Corp.
   Asset management fees                               17,635             18,968                   8,754              9,381
   Provisions for losses on loans and
     real estate acquired through foreclosure          83,609             20,771                       -             20,771
   Professional services                               19,252             20,349                   3,017              (499)
   Printing, supplies and postage                       5,093              5,533                   3,858              4,223
   Other                                                2,269              4,004                     846              2,516
                                                 -------------     --------------          --------------    ---------------
                                                      274,464            222,029                  81,173             84,453
                                                 -------------     --------------          --------------    ---------------

Net income                                           $394,106           $418,374                $197,475           $206,889
                                                 =============     ==============          ==============    ===============

Net income:  To general partners (1%)                $  3,941           $  4,184                $  1,975           $  2,069
             To limited partners (99%)                390,165            414,190                 195,500            204,820
                                                 -------------     --------------          --------------    ---------------
                                                     $394,106           $418,374                $197,475           $206,889
                                                 =============     ==============          ==============    ===============

Net income per $1,000 invested by limited
  partners for entire period:
    -where income is reinvested and
      compounded                                       $42.21             $41.65                  $21.08             $20.61
                                                 =============     ==============          ==============    ===============

    -where partner receives income in
      monthly distributions                            $41.49             $40.94                  $20.94             $20.47
                                                 =============     ==============          ==============    ===============

</TABLE>



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


<PAGE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                   STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
             FOR THE SIX MONTHS ENDED ENDED JUNE 30,2002 (unaudited)


                                       Limited         General           Total
                                      Partners'        Partners'       Partners'
                                      Accounts         Capital          Capital
                                    -------------    ------------   ------------

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

   Net income                           390,165           3,941          394,106

   Early withdrawal penalties           (5,982)               -          (5,982)

   Partners' withdrawals              (630,497)         (3,941)        (634,438)
                                    -------------    ------------   ------------

Balances at June 30, 2002            $9,173,954        $ 11,978      $ 9,185,932
                                    =============    ============   ============


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


<PAGE>



                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                            STATEMENTS OF CASH FLOWS
           FOR THE SIX MONTHS ENDED JUNE 30, 2002 and 2001(unaudited)
<TABLE>
<S>                                                                         <C>                    <C>

                                                                             SIX MONTHS ENDED JUNE 30,
                                                                   ----------------------------------------------
                                                                            2002                   2001
                                                                       ---------------        ---------------
Cash flows from operating activities
  Net income                                                            $    394,106              $  418,374
  Adjustments to reconcile net income to net cash provided by
      operating activities
    Provision for loan losses                                                  83,609                 20,771

    Early withdrawal penalty credited to income                               (5,982)                (1,539)
    Change in operating assets and liabilities
     Accrued interest and advances on loans                                   334,254              (157,839)
     Accounts payable                                                         (7,193)                      -
        Prepaid expenses                                                      (9,983)                      -
                                                                       ---------------        ---------------

Net cash provided by operating activities                                     788,811                279,767
                                                                       ---------------        ---------------

Cash flows from investing activities
    Principal collected on loans                                            1,537,076              4,932,790
    Loans made                                                              (710,262)            (1,376,306)
    Payments for real estate held for sale                                    (3,022)              (105,767)
    Proceeds from sale of real estate held for sale                             2,565                 34,260
    Proceeds from unsecured loans                                               7,500                  7,190
                                                                       ---------------        ---------------

Net cash provided by investing activities                                     833,857              3,492,167
                                                                       ---------------        ---------------

Cash flows from financing activities
    Net decrease in note payable-bank                                     (1,000,000)            (2,960,000)
    Formation loan collections                                                      -                 40,563
    Partners withdrawals                                                    (634,438)              (815,840)
                                                                       ---------------        ---------------

Net cash used in financing activities                                     (1,634,438)            (3,735,277)
                                                                       ---------------        ---------------

Net increase (decrease) in cash                                              (11,770)                 36,657

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

Cash - end of year                                                         $  378,074             $  305,657
                                                                       ===============        ===============

Cash payments for interest                                                  $  34,593              $  92,199
                                                                       ===============        ===============

</TABLE>


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


<PAGE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                            JUNE 30, 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.  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.


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.  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 amounts due
according to the contractual  terms of the loan agreement,  and the shortfall in
amounts due are not insignificant,  the carrying amount of the investment (cost)
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.

     At June 30,  2002 and  December  31, 2001 there were loans  categorized  as
impaired  by  the  Partnership  of  $335,454  and,  $889,439,  respectively.  In
addition, the impaired loans have accrued interest and advances totaling $18,428
and $277,479 at June 30, 2002 and December 31, 2001, respectively.  The decrease
in carrying value of the impaired loans of $38,634 and $150,092 at June 30, 2002
and  December  31,  2001,  respectively  is included in the  allowance  for loan
losses.  The average recorded  investment in the impaired loans was $612,447 and
$890,018 for the six months ended June 30, 2002, and for the year ended December
31, 2001, respectively.  During the six months ended June 30, 2002, and the year
ended  December 31, 2001,  $0 and $64,987 was received as cash payments on these
loans, respectively.
<PAGE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                            JUNE 30, 2002 (unaudited)

     As presented in Note 9 to the financial statements as of June 30, 2002, the
average  loan to  appraised  value  of  security  at the  time  the  loans  were
consummated  was  63.97%  and  60.66%,  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.

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 June 30, 2002 and December 31, 2001 and not  including  real
estate in process of acquisition at June 30, 2002:

                                               June 30,             December 31,
                                                 2002                   2001
                                            ----------------     ---------------

Costs of properties                           $ 1,021,783           $ 1,252,189
Reduction in value                              (349,195)             (380,056)
                                              -------------         ------------
Fair value reflected in financial statements  $   672,588           $   872,133
                                              =============         ============

F. Income Taxes

     No provision for Federal and State income taxes, except for a minimum state
tax of $800,  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 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 and
advances on loans.  The  composition of the allowance for loan losses as of June
30, 2002, and December 31, 2001 was as follows:

                                   June 30,                 December 31,
                                    2002                       2001
                               ----------------           ---------------
Impaired loans                       $  38,634                 $ 150,092
Unspecified loans                      796,740                   593,500
Unsecured loans                        135,813                   143,986
                               ----------------           ---------------
                                     $ 971,187                 $ 887,578
                               ================           ===============



<PAGE>


     Allowance  for loan losses  reconciliation:  Activity in the  allowance for
loan losses is as follows for the six months  through  June 30, 2002 and for the
year ended December 31, 2001.

                                         June 30,             December 31,
                                           2002                   2001
                                    ------------------    -------------------
Beginning Balance                           $887,578               $850,548
-----------------
Provision for loan losses                     83,609                 37,371
Write-offs                                         -                  (341)
                                    ------------------    -------------------
Ending Balance                              $971,187               $887,578
                                    ==================    ===================

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 net income 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 six months ended June 30, 2002, and for the
year ended December 31, 2001 late fee revenue of $5,849 and $8,495 respectively,
was recorded.


<PAGE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                            JUNE 30, 2002 (unaudited)


NOTE 3 - GENERAL PARTNERS AND RELATED PARTIES

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

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 the six months  through June 30, 2002,  and for the year 2001,
loan  brokerage  commissions  paid by the  borrowers  were  $6,400 and  $84,137,
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 $96,325 and $94,396 were incurred
for the six months  through June 30, 2002,  and for the year ended  December 31,
2001, 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 $$17,635 and $37,233,  were incurred for the
six months through June 30, 2002, and for the year 2001, 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.

E. 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 six months  through  June 30, 2002,  and for the year 2001,  clerical
costs totaling  $15,688 and $38,313,  respectively,  were  reimbursed to Redwood
Mortgage Corp. Such  reimbursements  are reflected as expenses in the Statements
of Income.


<PAGE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                            JUNE 30, 2002 (unaudited)


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.  Investors have the right to withdraw their capital over
a five-year period, or longer.

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.



<PAGE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                            JUNE 30, 2002 (unaudited)


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 June 30, 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,  described
below, 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.


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 June 30,
2002 and December 31, 2001 were $907,000 and $1,907,000,  respectively,  and the
interest  rate was 5.0%  (4.75%  prime + .25%) at June 30,  2002.  This  line of
credit expires May 1, 2003. The line of credit  requires the Partnership to meet
certain  financial  covenants.  As of June  30,  2002,  the  Partnership  was in
compliance with all loan covenants.

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


<PAGE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                            JUNE 30, 2002 (unaudited)


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

                                                                 June 30,                December 31,
                                                                   2002                      2001
                                                             ------------------        -----------------

Net assets - partners' capital per financial statements             $9,185,932               $9,432,246


Allowance for loan losses                                              971,187                  887,578
                                                             ------------------        -----------------
Net assets tax basis                                               $10,157,119              $10,319,824
                                                             ==================        =================
</TABLE>

     In 2001  approximately  68% 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) Secured loans (see note 2 (c)) had a carrying  value of $9,522,503  and
$10,091,195 at June 30, 2002 and December 31, 2001, respectively. The fair value
of these  investments of $9,123,638  and  $10,107,321  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  is also
considered in evaluating the fair value versus the carrying value.

<PAGE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                            JUNE 30, 2002 (unaudited)

NOTE 9 - ASSET CONCENTRATIONS AND CHARACTERISTICS

     Most loans are secured by recorded deeds of trust.  At June 30, 2002 and at
December 31, 2001, there were 33 and 36secured loans outstanding,  respectively,
with the following characteristics:
<TABLE>
<S>                                                                             <C>                   <C>

                                                                                June 30,              December 31,
                                                                                  2002                    2001
                                                                            ------------------      -----------------
Number of secured loans outstanding                                                        33                     36
Total secured loans outstanding                                                    $9,522,503            $10,091,195

Average secured loan outstanding                                                      288,561                280,311
Average secured loan as percent of total                                                3.03%                  2.78%
Average secured loan as percent of partners' capital                                    3.14%                  2.97%

Largest secured loan outstanding                                                    1,000,000              1,000,000
Largest secured loan as percent of total                                               10.50%                  9.91%
Largest secured loan as percent of partners' capital                                   10.89%                 10.60%

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

Largest percentage of secured loans in one county                                      33.83%                 31.92%
Average secured loan to appraised value of security at time
    loan was consummated                                                               63.97%                 60.66%

Number of secured loans in foreclosure                                                      2                      2
Amount of secured loans in foreclosure                                               $986,372              $ 216,493
</TABLE>


<PAGE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                            JUNE 30, 2002 (unaudited)


The following categories of loans are pertinent at June 30, 2002 and December
31, 2001:
<TABLE>
<S>                                                               <C>                         <C>

                                                                  June 30,                    December 31,
                                                                    2002                          2001
                                                             --------------------          -------------------

First Trust Deeds                                                    $ 5,227,783                  $ 5,042,062
Second Trust Deeds                                                     4,103,501                    4,803,146
Third Trust Deeds                                                        191,219                      245,987
                                                             --------------------          -------------------
  Total loans                                                          9,522,503                   10,091,195
Prior liens due other lenders                                          6,999,510                    9,318,486
                                                             --------------------          -------------------
  Total debt                                                         $16,522,013                  $19,409,681
                                                             ====================          ===================

Appraised property value at time of loan                             $25,826,553                  $31,997,080
                                                             ====================          ===================

Total investments as a percent of appraisals                              63.97%                       60.66%
                                                             ====================          ===================

Investments by Type of Property

Owner occupied homes                                                  $  456,428                   $  622,435
Non-owner occupied homes                                                 914,731                    1,435,444
Apartments                                                             1,563,213                    1,563,214
Commercial                                                             6,588,131                    6,470,102
                                                             --------------------          -------------------
                                                                     $ 9,522,503                  $10,091,195
                                                             ====================          ===================
</TABLE>


<PAGE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                            JUNE 30, 2002 (unaudited)

Scheduled maturity dates of loans as of June 30, 2002 are as follows:

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

                    2002                         $6,533,511
                    2003                            604,945
                    2004                            458,347
                    2005                             40,125
                    2006                            210,999
                 Thereafter                       1,674,576
                                        --------------------
                    Total                       $ 9,522,503
                                        ====================

     The scheduled maturities for 2002 above include approximately $4,551,609 in
12 loans which are past maturity at June 30, 2002. Although interest payments on
most of these loans are current,  $1,459,543 of these loans were  categorized as
delinquent over 90 days.

     Three loans with principal outstanding of $335,454 were considered impaired
at June 30, 2002. That is, interest accruals are no longer recorded thereon.

     The cash balance per bank statement at June 30, 2002 of $632,279 was in one
bank with interest bearing balances  totaling  $290,362.  The balances  exceeded
FDIC insurance limits (up to $100,000 per bank) by $532,279.  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 June 30, 2002,  amounts drawn down
against this facility was$907,000.

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 on these
loans.  As of June 30,  2002 the  Partnership  had  approximately  4 loans under
workout agreements totaling $1,019,833.


<PAGE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                            JUNE 30, 2002 (unaudited

NOTE 10:  SELECTED FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<S>                                              <C>             <C>              <C>             <C>              <C>

                                                                    Calendar Quarter
                                              --------------------------------------------------------------
                                                 First           Second           Third           Fourth           Annual
                                              -------------    ------------    -------------    ------------    -------------
      2002                                       $ 389,922        $278,648                -               -                -
      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          81,173                -               -                -
      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           1,975                -               -                -
      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         195,500                -               -                -
      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     $                          -               -                -
                                                               21
      2001                                         $    21          $   21           $   21          $   22           $   85
      2000                                         $    21          $   21           $   21          $   22           $   85

      Withdrawn
      2002                                         $    21          $   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.


<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,  and revenue and expenses
for the related period.  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 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 loan losses 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
loans and receivables,  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.

     As of 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 June
30, 2002, Partners' Capital totaled $9,185,932.

     At June  30,  2002,  the  Partnership  secured  loans  outstanding  totaled
$9,522,503.  This  represents  a decline of $568,692  from the December 31, 2001
secured loans balance..  This reduction in loans outstanding as of June 30, 2002
was  chiefly  due to  loan  repayments  and  loan  pay-offs  being  used to fund
withdrawals  to the limited  partners of $630,497 and $1,554,751 and paydown the
credit line  $1,000,000 and $1,593,000  during six months through June 30, 2002,
and twelve months through December 31, 2001. The Partnership began funding loans
on December 27,  1989,  and as of June 30,  2002,  had  credited  the  partners'
accounts with income at an average annualized (compounded) yield of 7.89%.

     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 occurred on 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 lower interest  rates.
Demand  for  loans  from  qualified  borrowers  continues  to be  strong  and as

<PAGE>

     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. The quarter
ended June 30, 2002 reflects a reduction in interest  income of $12,510 over the
corresponding  quarter of 2001. Interest income for the six month period through
June 30, 2002, however,  shows an overall increase of $14,171 over June 30, 2001
interest income. This occurred due to 1st quarter 2002 collection of interest on
loans,  previously  considered  impaired.  Based  upon  the  rates  expected  in
connection with the existing loans,  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 June 30, 2002,  the prime rate was 4.75% and
the line of credit rate was 5.0%. As of June 30, 2002 and December 31, 2001, the
balances outstanding were $907,000 and, $1,907,000,  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 without further interest costs. As of June 30, 2002,
the Partnership is current with its interest payments on the line of credit. For
the six (and three  months)  ended  June 30,  2002 and 2001,  interest  paid was
$$34,593,  and $92,199 ($12,366 and $19,428),  respectively.  The somewhat lower
interest  paid in 2002 versus  2001 is  reflective  of both a lower  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 for the six (and three months) ended June 30, 2002 and 2001
were  $96,325  and  $39,826  ($44,658  and  $18,755),  respectively.  These loan
servicing  fees  were  declining  as the  outstanding  mortgage  loan  portfolio
balances  declined  except  for  the  quarter  ended  June  30,  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 for
the six (and three months) ended June 30, 2002 and 2001 were $17,635 and $18,968
($8,754 and $9,381),  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  which  are  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,  the allowance for loan losses 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 June 30,  2002,  we have
commenced  foreclosure  proceedings  against two loans.  Management has provided
$83,609 and $20,771 ($0 and $20,771) as  provisions  for loan losses for the six
(and  three  months)  ended  June 30,  2002 and  2001,  respectively.  The total
cumulative  provision  for loan losses as of June 30,  2002 is  $971,187  and is
considered by the general partners to be adequate.

     The Partnership  makes loans primarily in Northern  California.  As of June
30,  2002,  approximately  68.30%,   ($6,503,301)  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

<PAGE>

     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.

     Despite  fears over failing  businesses,  ongoing job losses and  dwindling
stock  portfolios,  the real estate  market seems to be doing  remarkably  well.
According to the  California  Association of Realtors  president  Robert Bailey,
"Residential  real estate in California,  particularly  in the San Francisco Bay
Area,  continued to rebound  aggressively  last month  (April 2002)  compared to
2001." Sales in the San Francisco Bay Area  increased 73% in April 2002 compared
to a year ago and surged nearly 120% in Santa Clara County.  The median price of
homes sold in Santa Clara  County in April 2002 was  $552,250  according  to the
California  Association  of  Realtors.  The median  price of an existing  single
family  detached  home in  California  during April 2002 was  $321,950,  a 26.1%
increase over the $255,310 median for April 2001 the association's  report says.
"Low inventory,  favorable mortgage interest rates and rapidly rising home price
appreciation  will  continue to  intensify  the pace of home sales in the coming
months", says Leslie Appleton-Young,  the association's vice president and chief
economist.  For the Partnership  these  statistics  imply that the values of the
homes  secured by mortgages in our  portfolio  should  remain firm and assist in
reducing losses if the take back of collateral  through the foreclosure  process
should eventuate. It also implies increased loan activity, as the number of real
estate transactions is increasing, leaving more loan opportunities for lenders.

     Commercial property vacancy rates have continued to climb.  According to BT
Commercial  overall San  Francisco  Bay Area vacancy  rates have risen to almost
20%, up from 16.6% in the last quarter of 2001. Rental rates plunged 9% from $30
per square foot in the fourth  quarter of 2001 to $27.24 in the first quarter of
2002.  Average  asking rates in the San  Francisco  Bay Area the first quarter a
year ago were $57.24.  To the  Partnership,  these higher vacancy rates may mean
that we could experience higher delinquencies and foreclosures if our borrowers'
tenants' leases expire or their rental space becomes  available through business
failures.

     For Partnership  loans outstanding as of June 30, 2002, the Partnership had
an  average  loan to value  ratio  computed  as of the date the loan was made of
63.97%.  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 has an interest in land located in East Palo Alto, CA which
was acquired through  foreclosure.  The Partnership's  basis of $61,347 for both
the six months  through June 30, 2002, and for the year ended December 31, 2001,
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 six (and
three months) through June 30, 2002 and 2001, the Partnership made distributions
of  earnings  to limited  partners  after  allocation  of  syndication  costs of
$158,736 and $195,064  ($78,288 and  $95,120),  respectively.  Distribution  and
retention of Earnings to limited partners after allocation of syndication  costs
for the six (and  three  months)  through  June 30,  2002 and 2001,  to  limited
partners'   capital  was  $231,429  and  $219,126   ($117,212   and   $109,700),
respectively.  As of June 30,  2002 and  December  31,  2001,  limited  partners
electing to withdraw  earnings  represented 41% 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 six months (and three months) through June 30,

<PAGE>

     2002 and 2001,  $74,772 and $61,504  ($41,481 and  $16,508),  respectively,
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 December 31,
2001, and June 30, 2002, respectively and is expected by the general partners to
commonly occur at these levels.

     Additionally, for the six months (and three months) ended June 30, 2002 and
2001,  $402,971  and  $560,008  ($185,840  and  $276,762),   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 had the anticipated  effect of the  Partnership  growing,
primarily  through  reinvestment  of earnings in years one through  five.  Then,
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.

     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  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").


<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 six months ended June 30, 2002. 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      Loan Servicing Fee for servicing loan ........................                 $96,325
    Corp.

General Partners          Asset Management Fee for managing assets .....................                 $17,635
&/or Affiliates

General Partners          1% interest in profits .......................................                  $3,941

</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          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...................................................                 $6,400


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 .....                   $603

Gymno Corporation
Inc.                      Reconveyance Fee..............................................                   $183

</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 . . . . . . . . . . . . . . . . . . . . . . . . . $15,688


<PAGE>


                                     PART 2
                                OTHER INFORMATION




Item 1.     Legal Proceedings

                  The Partnership periodically is a defendant in various legal
                  actions. 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

                  (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






<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 14th day of August
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 14th day of August 2002.


Signature                              Title                          Date


/S/ Michael R. Burwell
-------------------------
Michael R. Burwell                General Partner                August 14, 2002



/S/ Michael R. Burwell
-------------------------
Michael R. Burwell         President, Secretary/Treasurer        August 14, 2002
                           of Gymno Corporation (Principal
                             Financial and Accounting
                            Officer); Director of Gymno
                                    Corporation



<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 June 30, 2002 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
company.


/s/ Michael R. Burwell
-----------------------------
Michael R. Burwell, General Partner
August 14, 2002



<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 June 30, 2002 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
company.


/s/ Michael R. Burwell
-----------------------------
Michael R. Burwell, President,
Secretary/Treasurer & Chief Financial
Officer of Gymno Corporation, General Partner
August 14, 2002