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                        September 30, 2002
    ----------------------------------------------------------------------------
    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

<PAGE>



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

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

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

Cash                                                                             $ 267,158          $  389,844
                                                                          -----------------     ---------------

Loans
   Loans, secured by deeds of trust, held to maturity                            9,201,968          10,091,195
   Loans, unsecured                                                                132,189             173,731
                                                                          -----------------     ---------------
                                                                                 9,334,157          10,264,926
   Less allowance for loan losses                                                (955,213)           (887,578)
                                                                          -----------------     ---------------
     Net loans                                                                   8,378,944           9,377,348
                                                                          -----------------     ---------------

Interest and other receivables
   Accrued interest                                                                151,624             660,551
   Advances on loans                                                                15,080              50,665
                                                                          -----------------     ---------------

     Total interest and other receivables                                          166,704             711,216
                                                                          -----------------     ---------------

Real estate owned, held for sale                                                 1,818,275             872,133
                                                                          -----------------     ---------------

     Total assets                                                              $10,631,081         $11,350,541
                                                                          =================     ===============

</TABLE>

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

Liabilities
   Notes payable - bank line of credit                                          $1,507,000          $1,907,000
   Accounts payable                                                                  4,102
                                                                                                        11,295
                                                                          -----------------     ---------------
     Total liabilities                                                           1,511,102           1,918,295
                                                                          -----------------     ---------------

Partners' capital
   Limited partners' capital, subject to redemption                              9,108,001           9,420,268

   General partners' capital                                                        11,978              11,978
                                                                          -----------------     ---------------
     Total partners' capital                                                     9,119,979           9,432,246
                                                                          -----------------     ---------------

     Total liabilities and  partners' capital                                  $10,631,081         $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 NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2002 and 2001 (unaudited)

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

                                                        NINE MONTHS ENDED                         THREE MONTHS ENDED
                                                          SEPTEMBER 30,                             SEPTEMBER 30,
                                                 --------------------------------          ---------------------------------
                                                     2002              2001                    2002               2001
                                                 -------------     --------------          --------------    ---------------
Revenues
   Interest - on loans                               $896,972           $888,060                $250,757           $256,016
   Interest - interest bearing accounts                 2,134              3,312                     354                901
   Late charges                                        11,376              6,478                   5,527              3,394
   Other income                                        18,636              3,865                   3,910              1,001
                                                 -------------     --------------          --------------    ---------------
                                                      929,118            901,715                 260,548            261,312
                                                 -------------     --------------          --------------    ---------------

Expenses
   Mortgage servicing fees                            123,042             55,195                  26,717             15,369
   Interest on note payable - bank                     48,432            104,741                  13,839             12,542
   Clerical costs through Redwood   Mortgage           23,229             29,569                   7,541              9,190
Corp.
   Asset management fees                               26,285             28,176                   8,650              9,208
   Provisions for losses on loans and
      real estate acquired through foreclosure         78,359             20,503                 (5,250)              (268)
   Professional services                               35,488             30,391                  16,236             10,042
   Printing, supplies and postage                       6,696              7,681                   1,603              2,148
   Other                                                2,703              4,004                     434                  -
                                                 -------------     --------------          --------------    ---------------
                                                      344,234            280,260                  69,770             58,231
                                                 -------------     --------------          --------------    ---------------

Net income                                           $584,884           $621,455                $190,778           $203,081
                                                 =============     ==============          ==============    ===============

Net income:  To general partners (1%)                   5,849              6,215                   1,908              2,031
                     To limited partners (99%)        579,035            615,240                 188,870            201,050
                                                 -------------     --------------          --------------    ---------------
                                                     $584,884           $621,455                $190,778           $203,081
                                                 =============     ==============          ==============    ===============

Net income per $1,000 invested by limited
  partners for entire period

    -where income is reinvested and
      compounded                                       $63.69             $63.11                  $20.61             $20.61
                                                 =============     ==============          ==============    ===============

    -where partner receives income in
      monthly distributions                            $61.96             $61.41                  $20.47             $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 NINE MONTHS ENDED SEPTEMBER 30,2002 (unaudited)

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

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

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

   Net income                                  579,035               5,849              584,884

   Early withdrawal penalties                  (9,300)                   -              (9,300)

   Partners' withdrawals                     (882,002)             (5,849)            (887,851)
                                       ----------------     ---------------     ----------------

Balances at September 30, 2002              $9,108,001             $11,978           $9,119,979
                                       ================     ===============     ================

</TABLE>

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 NINE MONTHS ENDED SEPTEMBER 30, 2002 and 2001(unaudited)
<TABLE>
<S>                                                                         <C>                    <C>

                                                                          NINE MONTHS ENDED SEPTEMBER 30,
                                                                   ----------------------------------------------
                                                                            2002                   2001
                                                                       ---------------        ---------------
Cash flows from operating activities
  Net income                                                                $ 584,884              $ 621,455
  Adjustments to reconcile net income to net cash provided by
       operating activities
    Provision for losses on loans and real estate acquired
       through foreclosure                                                     78,359                 20,503

    Early withdrawal penalty credited to income                               (9,300)                (1,890)
    Change in operating assets and liabilities
     Accrued interest and advances on loans                                   506,086              (231,628)
     Accounts payable                                                         (7,193)                  8,695
                                                                       ---------------        ---------------

Net cash provided by operating activities                                   1,152,836                417,135
                                                                       ---------------        ---------------

Cash flows from investing activities
    Principal collected on loans                                            2,060,641              5,750,503
    Loans made                                                            (1,867,781)            (3,050,730)
    Payments for real estate held for sale                                  (194,220)              (425,660)
    Proceeds from sale of real estate held for sale                             2,565                 34,259
    Proceeds from unsecured loans                                              11,124                 10,940
                                                                       ---------------        ---------------

Net cash provided by investing activities                                      12,329              2,319,312
                                                                       ---------------        ---------------

Cash flows from financing activities
    Net decrease in note payable-bank                                       (400,000)            (1,598,000)
    Formation loan collections                                                      -                 71,461
    Partners withdrawals                                                    (887,851)            (1,177,825)
                                                                       ---------------        ---------------

Net cash used in financing activities                                     (1.287,851)            (2,704,364)
                                                                       ---------------        ---------------

Net increase (decrease) in cash                                             (122,686)                 32,083

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

Cash - end of period                                                          267,158                301,083
                                                                       ===============        ===============

Cash payments for interest                                                  $  48,432             $  104,741
                                                                       ===============        ===============

</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
                         SEPTEMBER 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.


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.

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.

     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.  At  September  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  $10,334 and $277,479 at September  30,
2002 and December 31, 2001, respectively.  The decrease in carrying value of the
impaired  loans of $38,634 and $150,092 at  September  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 nine
months  ended  September  30,  2002,  and for the year ended  December 31, 2001,
respectively.  During the nine months ended  September  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
                         SEPTEMBER 30, 2002 (unaudited)


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     As  presented in Note 9 to the  financial  statements  as of September  30,
2002, and December 31, 2001, the average loan to appraised  value of security at
the time the loans were  consummated was 65.99% 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 September  30, 2002 and December 31, 2001 and not  including
real estate in process of acquisition at September 30, 2002:

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

                                                         September 30,               December 31,
                                                              2002                       2001
                                                        -----------------           ---------------

Costs of properties                                           $2,167,470                $1,252,189
Reduction in value, including estimated costs of sale          (349,195)                 (380,056)
                                                        -----------------           ---------------

Fair value reflected in financial statements                  $1,818,275                 $ 872,133
                                                        =================           ===============
</TABLE>

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.

<PAGE>

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


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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
September 30, 2002, and December 31, 2001 was as follows:

                                    September 30,             December 31,
                                         2002                     2001
                                 -----------------        -----------------
Impaired loans                            $38,634                 $150,092
Unspecified loans                         784,390                  593,500
Unsecured loans                           132,189                  143,986
                                 -----------------        -----------------
                                         $955,213                 $887,578
                                 =================        =================

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

                                   September 30,             December 31,
                                      2002                     2001
                                -----------------        -----------------
Beginning Balance                      $ 887,578                 $850,548
Provision for loan losses                 78,359                   37,371
Write-offs                              (10,724)                    (341)
                                -----------------        -----------------
Ending Balance                         $ 955,213                 $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 nine months ended September 30, 2002, and
September  30,  2001 late fee revenue of $11,376  and $6,478  respectively,  was
recorded.
<PAGE>

                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                         SEPTEMBER 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 nine months through  September 30, 2002, and September 30,
2001, loan brokerage commissions paid by the borrowers were $24,661 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 $123,042 and $55,195 were incurred
for the nine  months  through  September  30,  2002,  and  September  30,  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 $26,285 and $28,176 were incurred for the nine
months through September 30, 2002, and September 30, 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 nine months  through  September  30, 2002,  and  September  30, 2001,
clerical costs totaling  $23,229 and $29,569,  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
                         SEPTEMBER 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.

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 September  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.
<PAGE>



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


NOTE 4 - OTHER PARTNERSHIP PROVISIONS (Continued)

     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 September
30, 2002 and December 31, 2001 were $1,507,000 and $1,907,000, respectively, and
the interest rate was 5.0% (4.75% prime + .25%) at September 30, 2002. This line
of credit  expires May 1, 2003. The line of credit  requires the  Partnership to
meet certain financial covenants.  As of September 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
                         SEPTEMBER 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>

                                                               September 30,             December 31,
                                                                   2002                      2001
                                                             ------------------        -----------------

Net assets - partners' capital per financial statements             $9,119,979               $9,432,246

Allowance for loan losses                                              955,213                  887,578
                                                             ------------------        -----------------
Net assets tax basis                                               $10,075,192              $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 $9,201,968  and
$10,091,195 at September 30, 2002 and December 31, 2001, respectively.  The fair
value of these  investments of $8,699,544 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
                         SEPTEMBER 30, 2002 (unaudited)

NOTE 9 - ASSET CONCENTRATIONS AND CHARACTERISTICS

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

                                                                              September 30,           December 31,
                                                                                  2002                    2001
                                                                            ------------------      -----------------
Number of secured loans outstanding                                                        31                     36
Total secured loans outstanding                                                    $9,201,968            $10,091,195

Average secured loan outstanding                                                      296,838                280,311
Average secured loan as percent of total                                                3.23%                  2.78%
Average secured loan as percent of partners' capital                                    3.25%                  2.97%

Largest secured loan outstanding                                                    1,000,000              1,000,000
Largest secured loan as percent of total                                               10.87%                  9.91%
Largest secured loan as percent of partners' capital                                   10.96%                 10.60%

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

Largest percentage of secured loans in one county                                      28.89%                 31.92%
Average secured loan to appraised value of security at time
    loan was consummated                                                               65.99%                 60.66%

Number of secured loans in foreclosure                                                      1                      2
Amount of secured loans in foreclosure                                               $ 31,807              $ 216,493
</TABLE>

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

                                                                             September 30,           December 31,
                                                                                 2002                    2001
                                                                           ------------------      -----------------
First Trust Deeds                                                                 $4,735,668             $5,042,062
Second Trust Deeds                                                                 4,259,964              4,803,146
Third Trust Deeds                                                                    206,336                245,987
                                                                           ------------------      -----------------
  Total loans                                                                      9,201,968             10,091,195
Prior liens due other lenders                                                      6,338,955              9,318,486
                                                                           ------------------      -----------------
  Total debt                                                                     $15,540,923            $19,409,681
                                                                           ------------------      -----------------

Appraised property value at time of loan                                         $23,550,024            $31,997,080
                                                                           ------------------      -----------------

Total investments as a percent of appraisals                                          65.99%                 60.66%
                                                                           ------------------      -----------------

Investments by Type of Property

Owner occupied homes                                                              $1,031,032              $ 622,435
Non-owner occupied homes                                                           1,375,092              1,435,444
Apartments                                                                           608,647              1,563,214
Commercial                                                                         6,187,197              6,470,102
                                                                           ------------------      -----------------
                                                                                 $ 9,201,968            $10,091,195
                                                                           ==================      =================
</TABLE>

<PAGE>

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


NOTE 9 - ASSET CONCENTRATIONS AND CHARACTERISTICS (Continued)

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

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

                    2002                         $4,275,336
                    2003                          1,404,893
                    2004                          1,021,797
                    2005                             40,125
                    2006                             96,716
                 Thereafter                       2,363,101
                                        --------------------
                    Total                        $9,201,968
                                        ====================

     The scheduled maturities for 2002 above include approximately $3,229,004 in
9 loans  which are past  maturity  at  September  30,  2002.  Although  interest
payments  on most of these  loans are  current,  $2,061,414  of these loans were
categorized as delinquent over 90 days.

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

     The cash balance per bank  statement at September  30, 2002 of $157,519 was
in one bank.  The balances  exceeded FDIC  insurance  limits (up to $100,000 per
bank) by $57,519. 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
September 30, 2002, amounts drawn down against this facility was $1,507,000.

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 September 30, 2002 the Partnership had  approximately 3 loans under
workout agreements totaling $260,270.
<PAGE>

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


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

                                                                    Calendar Quarter
                                              --------------------------------------------------------------
                                                 First           Second           Third           Fourth           Annual
                                              -------------    ------------    -------------    ------------    -------------
Revenues
      2002                                        $389,922         278,648          260,548               -                -
      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           69,770               -                -
      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            1,908               -                -
      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          188,870               -                -
      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           $   21               -                -
      2001                                          $   21          $   21           $   21          $   22           $   85
      2000                                          $   21          $   21           $   21          $   22           $   85

      Withdrawn
      2002                                          $   21          $   21           $   20               -                -
      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'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 doubtful  accounts
(i.e.  the  amount of  allowance  established  against  loans  receivable  as an
estimate of potential loan losses)  including the accrued  interest and advances
that are  estimated  to be  unrecoverable  based on  estimates  of amounts to be
collected  plus estimates of the value of the property as collateral and (2) the
valuation of real estate acquired  through  foreclosure.  At September 30, 2002,
there were 3 properties acquired through foreclosure.

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

     Recent  trends in the  economy  have been taken into  consideration  in the
aforementioned  process of  arriving at the  allowance  for  doubtful  accounts.
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 2002 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 Corp.  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 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 nine months ended September
30, 2002 and 2001, loan brokerage commissions paid by borrowers were $24,661 and
$84,137, respectively.

     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 $123,042 and $55,195 were incurred for the
nine months ended September 30, 2002 and 2001, respectively.
<PAGE>

     o Asset  Management  Fee 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 $26,285 and $28,176 were  incurred by the  Partnership  for the nine
months ended September 30, 2002 and 2001, 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 September 30, 2002 and 2001, 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 and nine months ended  September 30,
2002 and 2001

     The net income  decrease  of $12,303  (6.06%)  for the three  months  ended
September  30, 2002 versus the three month period ended  September  30, 2001 was
due  primarily to a decrease in interest  earned on loans of $5,259  (2.05%),  a
decrease in interest-interest  bearing accounts of $547 (60.71%), an increase in
late  charges of $2,133  (62.85%),  and an  increase  in other  income of $2,909
(290.61%)  offset  by  expense  increases.   Significant  expense  increases  or
(decreases) for the three month period ended September 30, 2002 versus September
30, 2001  included  higher  mortgage  servicing  fees of $11,348,  change in the
provision for losses on loans and real estate  acquired  through  foreclosure of
($4,982) and an increase in professional fee of $6,194.

     The net  income  decrease  of $36,571  (5.88%)  for the nine  months  ended
September 30, 2002 versus the nine month period ended September 30, 2001 was due
primarily  to an increase in interest  earned on loans of $8,912 and an increase
in late  charges  and other  income of  $19,669;  offset by  expense  increases.
Significant  expense  increases or  (decreases)  for the nine month period ended
September 30, 2002 versus September 30, 2001 included higher mortgage  servicing
fees of  $67,847,  an  increase  in the  provision  for losses on loans and real
estate acquired through foreclosure of $57,856,  and an increase in professional
fees of $5,097.

     The increase (decrease) in interest on loans of ($5,259) (2.05%) and $8,912
(1%) for the three and nine  month  periods  ended  September  30,  2002  versus
September  30,  2001 was due  primarily  to a  reduction  of the loan  portfolio
average  interest rate for the third quarter 2002, and the increase for the nine
months  ended  September  30,  2002 was due to  collection  of interest on loans
previously  considered  impaired;  offset  by a  lower  average  loan  portfolio
interest rate as compared to September 30, 2001.

     The increase  (decrease) in interest on note  payable-bank  of $1,297 (10%)
and ($56,309)  (54%) for the three and nine month  periods  ended  September 30,
2002 versus September 30, 2001 is due to the approximately  4.0% (9.0% vs. 5.0%)
lowering  of  the  interest  rate  charged  the  Partnership  during  the  first
three-quarters of 2002 as compared to 2001 and due to lower overall usage of the
line of credit during the first three-quarters of 2002.
<PAGE>

     The increase in mortgage servicing fees of $11,348 (74%) and $67,847 (123%)
for the three and nine month periods ended  September 30, 2002 versus  September
30, 2001 is primarily attributable to increased servicing of impaired loans.

     The increase of $57,856  (282%) in  provision  for losses on loans and real
estate acquired through foreclosure for the nine months ended September 30, 2002
versus the  respective  nine month period ended  September 30, 2001 reflects the
general  partners'  estimate of an appropriate  allowance for  anticipated  loan
losses. As the Partnership's real estate owned has increased,  the provision for
estimated  loan losses has also been  increased.  At September  30, 2002,  total
provisions  for losses on loans  equaled  $955,213,  which the general  partners
consider to be adequate.

     The decrease in asset  management fees of $558 (6%) and $1,891 (7%) for the
three and nine months ended  September  30, 2002 versus the  respective  periods
ended  September  30, 2001 is due to a decrease in the  partners'  capital under
management  at  September  30,  2002  and  2001 of  $9,119,979  and  $9,619,509,
respectively.

     The increase in professional  fees of $6,194 (62%) and $5,097 (17%) for the
three and nine months ended September 30, 2002 versus  September 30, 2001 is due
to the Partnership  incurring  greater costs in 2002 than in 2001 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 and nine months ended  September 30, 2002 earnings and capital  liquidated
was  $254,823  and  $891,302,   respectively  versus  $361,075  and  $1,177,651,
respectively for the corresponding period in 2001.

     The  Partnership  utilized  its bank line of credit  less  during the first
three-quarters of 2002 compared to 2001. The outstanding  balances of $1,507,000
at September 30, 2002 versus  $1,902,000 at September 30, 2001 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.

     At September 30, 2002,  outstanding  foreclosures  decreased to 1 ($31,807)
from the two  ($201,807)  that existed at September  30, 2001.  During the three
months ended September 30, 2002, the outstanding  number of foreclosures  stayed
at 1. One foreclosure originated in 2002, with a principal balance of $1,251,090
was  acquired  at  foreclosure  sale in July 2002.  The  general  partners  have
reviewed the appraisal,  visited the property with real estate professionals and
have  concluded  that a specific  reserve  for losses  against  this loan is not
necessary  as the  collateral  securing  the  loan  appears  adequate  to  cover
collection  of  sums  due.  These  foreclosures  are a  reflection  of the  more
difficult  economic  times at September  30, 2002 as compared to  September  30,
2001,  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 $18,261 and $24,661 for the three and nine months  ended  September
30, 2002 as compared to $38,231 and $84,137 for the three and nine months  ended
September  30, 2001.  The  reduction  is due to less loans  written in the three
months and nine months ended September 30, 2002.

     As discussed  previously,  at the time of subscription to the  Partnership,
limited partners must elect either to receive monthly,  quarterly or annual cash
distributions  from the  Partnership,  or to compound  earnings in their capital
account.
<PAGE>

     During the three and nine month  periods  ended  September  30, 2002 stated
below,  the  Partnership  made the following  allocation of earnings both to the
limited partners who elected to compound their earnings, and those that chose to
distribute:
<TABLE>
<S>                   <C>                    <C>                    <C>                      <C>


                                  Nine months ended                              Three months ended
                      September 30, 2002     September 30, 2001      September 30, 2002      September 30, 2001

Compounding                       $347,885               $330,794                $116,456                 $111,668
Distributing                      $231,150               $284,446                 $72,414                  $89,382
</TABLE>

     Also, the Partnership allows the limited partners to withdraw their capital
account  subject to  certain  limitations.  Earnings  and  capital  liquidations
including  early  withdrawals  during  the three and nine  month  periods  ended
September 30:
<TABLE>
<S>                       <C>                    <C>                    <C>                    <C>

                                      Nine months ended                             Three months ended
                          September 30, 2002     September 30, 2001     September 30, 2002     September 30, 2001

Cash distributions                    $231,150               $284,446                $72,414                $89,382
Capital liquidation*                  $660,152               $893,205               $182,409               $271,693
                         ---------------------- ---------------------- ---------------------- ----------------------

Total                                 $891,302             $1,177,651               $254,823               $361,075
                         ====================== ====================== ====================== ======================
</TABLE>

*These amounts represent gross of early withdrawal penalties.

Current Economic Conditions.

     The  Partnership  makes  loans  primarily  in  Northern  California.  As of
September  30, 2002,  approximately  66.5% of the loans held were in the six San
Francisco  Bay Area  Counties.  The  remainder  of the loans  held were  secured
primarily by Northern California real estate outside the San Francisco Bay Area.
Like the  rest of the  nation,  the San  Francisco  Bay  Area has also  felt the
recession  and  accompanying   slow  down  in  economic  growth  and  increasing
unemployment.  The technology companies of Silicon Valley, the airline industry,
the tourism industry and other industries are feeling the effects of the overall
United States recession, which includes lower earnings, losses and layoffs.

     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 San Jose  Mercury News of August 20, 2002,  Bay Area home sales
rose 22% in July compared  with a year earlier,  continuing an upward trend that
began in January.  The median price of homes in the nine-county area rose nearly
10% from last year to $436,000.  With the Bay Area economy  still  faltering and
unemployment  as high as 7.6% in Santa  Clara  County,  many had  expected  real
estate  prices would be down by now, not up from a year ago.  Mortgage  rates at
historic  lows and a decent  supply of homes on the  market  have kept the local
market  relatively  busy,   especially  for  lower-priced  homes.  Annual  price
appreciation varied from 5.1% in Santa Clara County,  where the median price was
$515,000 for existing single-family homes sold in July, to 22.5% in Napa County,
where the median price was $359,000.  Sales of single-family homes rose 22.8% in
Santa Clara County,  according to statistics  released by DataQuick  Information
Systems,  which  gathers  data from  public  records.  Most  counties  saw sales
activity increase more than 20% from last year, and the growth was closer to 30%
in  Alameda  and San Mateo  counties.  But the July data  reflects  transactions
negotiated  in May and June,  and local  real  estate  agents say the market has
slowed dramatically since June. "I think fewer transactions and lower prices are
in the near  future,"  said  Gary  Shapiro  of ReMax  Real  Estate  Services  in
Cupertino. "It's already here." The slowdown is partly a normal seasonal change,
real estate agents say, as prospective  buyers  vacation rather than house hunt.
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.
<PAGE>

     According to the San Francisco Chronicle, "The Bay Area commercial market's
fundamental indicators are showing signs of hitting bottom, but a recovery is at
least 18 months  away,  according  to reports  last week from major real  estate
services  firms.  At the end of the third quarter,  both Cushman & Wakefield and
Grubb & Ellis found  incremental  positive  news for the stagnant San  Francisco
office market,  but it was barely reason to smile.  Cushman & Wakefield said the
rate of decline in asking  rents has slowed  substantially.  Average rent in the
central  business  district  fell to $31.56  per  square  foot from  $32.40  the
previous  quarter.  Grubb & Ellis said the San Francisco  office market showed a
positive net  absorption,  or demand,  for the first time in two years.  A grand
total of 127,000  square feet was  absorbed." 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  September  30,  2002,  the
Partnership  had an average loan to value ratio computed as of the date the loan
was made of 65.99%.  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.


           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The  following  table  contains  information  about  the cash held in money
market accounts, loans held in the partnership's portfolio and a note payable on
our line of credit as of September 30, 2002. The presentation, for each category
of  information,  aggregates the assets and  liabilities by their maturity dates
for  maturities  occurring in each of the years 2002 through 2006 and separately
aggregates the information  for all maturities  arising after 2006. The carrying
values of these assets and liabilities  approximate  their fair market values as
of September 30, 2002:
<TABLE>
<S>                              <C>          <C>           <C>          <C>         <C>      <C>             <C>

                                 2002         2003          2004         2005        2006     Thereafter      Total
                             ------------- ------------ ------------- ----------- ----------- ------------ -------------
Interest earning assets:
Money market accounts            $ 13,280                                                                      $ 13,280
Avg. interest rate                  1.20%                                                                         1.20%
Loans secured by deeds
   Of trust                    $4,275,336    1,404,893     1,021,797      40,125      96,716    2,363,101    $9,201,968
Average interest rate              11.02%       10.93%        10.60%       7.00%       6.50%        7.46%         9.98%
Interest bearing
   liabilities:
Note payable to bank           $1,507,000                                                                    $1,507,000
Average interest rate               5.00%                                                                         5.00%

</TABLE>

Market Risk.

     The  Partnership's  note  payable to the bank for its 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
September 30, 2002) 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
<PAGE>

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.

     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 nine months ended  September  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 Corp.           Loan Servicing Fee for servicing loan ........................            $123,042

    General Partners
       &/or Affiliates               Asset Management Fee for managing assets .....................             $26,285

    General Partners                 1% interest in profits .......................................              $5,849


</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............            $24,661

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 ............................             $1,767

Gymno Corporation, Inc.        Reconveyance Fee.....................................................               $302

</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 . . . . . . . . . . . . . . . . . . . . . . . . . . $23,229

<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
November 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 November 2002.


Signature                              Title                        Date


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


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

<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,  including its  consolidated
subsidiaries, is made known to us by others within those entities,  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  date  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
November 14, 2002
<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  September 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
Partnership.


/s/ Michael R. Burwell
_____________________________
Michael R. Burwell, General Partner
November 14, 2002

<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,  including its  consolidated
subsidiaries, is made known to us by others within those entities,  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  date  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
November 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  September 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
Partnership.


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