UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





(Mark
One)


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


SECURITIES
EXCHANGE ACT OF 1934





For
the Quarterly Period Ended March 31, 2009





OR





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


SECURITIES
EXCHANGE ACT OF 1934





For
the transition period from ______________ to ______________





Commission
File Number:  000-17573





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 incorporation
            
            (I.R.S.
      Employeror
      organization)
            
            Identification
      No.)





900
      Veterans Blvd., Suite 500, Redwood City, CA
            94063-1743(Address
      of principal executive offices)
            (Zip
      Code)





(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 such reports), and (2) has been subject to such filing requirements for
the past 90 days.





Yes
            XX
            
            No





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).





Yes
            
            
            No





1





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





(Check
one):





Large
      accelerated filer
            [  ]
            
            Accelerated
      filer
            [  ]Non-accelerated
      filer
            [  ]
            
            Smaller
      reporting company
            [X](Do
      not check if a smaller reporting company)





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





Yes
            
            
            No
            XX





2


Part
I – Item I.    FINANCIAL STATEMENTS





REDWOOD
MORTGAGE INVESTORS VII


(A
California Limited Partnership)


BALANCE
SHEETS


MARCH
31, 2009 (unaudited) AND DECEMBER 31, 2008 (audited)





ASSETS





March
      31,
              
              
              December
      31,2009
              
              
              2008Cash
      and cash equivalents
              
              $
              479,479
              
              
              $
              183,779LoansLoans,
      secured by deeds of trust
              
              
              5,865,081
              
              
              
              6,425,871Loans,
      unsecured, net discount of $81,980 and $84,037 forMarch
      31, 2009 and December 31, 2008, respectively
              
              
              263,296
              
              
              
              275,181Allowance
      for loan losses
              
              
              (220,277
              )
              
              
              (236,893
              )Net
      loans
              
              
              5,908,100
              
              
              
              6,464,159Interest
      and other receivablesReceivable
      from affiliate
              
              
              2,962
              
              
              
              5,838Accrued
      interest and late fees
              
              
              113,058
              
              
              
              106,322Advances
      on loans
              
              
              6,465
              
              
              
              4,593Total
      interest and other receivables
              
              
              122,485
              
              
              
              116,753Investment
      in limited liability company
              
              
              1,119,602
              
              
              
              1,069,877Real
      estate held, net
              
              
              2,138,393
              
              
              
              1,942,067Total
      assets
              
              $
              9,768,059
              
              
              $
              9,776,635





LIABILITIES AND PARTNERS’
CAPITAL





LiabilitiesAccounts
      payable and accrued liabilities
              
              $
              27,351
              
              
              $
              16,230Mortgage
      payable
              
              
              500,000
              
              
              
              500,000Payable
      to affiliate
              
              
              80,533
              
              
              
              74,830Total
      liabilities
              
              
              607,884
              
              
              
              591,060Partners’
      capitalLimited
      partners’ capital, subject to redemption
              
              
              9,148,202
              
              
              
              9,173,602General
      partners’ capital
              
              
              11,973
              
              
              
              11,973Total
      partners’ capital
              
              
              9,160,175
              
              
              
              9,185,575Total
      liabilities and partners’ capital
              
              $
              9,768,059
              
              
              $
              9,776,635








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





3


REDWOOD
MORTGAGE INVESTORS VII


(A
California Limited Partnership)


STATEMENTS
OF INCOME


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (unaudited)








2009
              
              
              2008RevenuesInterest
      on loans
              
              $
              145,500
              
              
              $
              143,770Other
      interest
              
              
              653
              
              
              
              1,825Late
      fees
              
              
              456
              
              
              
              695Other
              
              
              761
              
              
              
              1,482Total
      revenues
              
              
              147,370
              
              
              
              147,772ExpensesMortgage
      servicing fees
              
              
              14,614
              
              
              
              —Clerical
      costs through Redwood Mortgage Corp.
              
              
              3,045
              
              
              
              —Asset
      management fees
              
              
              2,875
              
              
              
              —Provision
      for losses on loans and real estate owned
              
              
              1,031
              
              
              
              —Professional
      services
              
              
              15,939
              
              
              
              18,464Other
              
              
              13,371
              
              
              
              7,402Total
      expenses
              
              
              50,875
              
              
              
              25,866Net
      income
              
              $
              96,495
              
              
              $
              121,906Net
      income:  general partners (  1%)
              
              $
              965
              
              
              $
              1,229limited
      partners (99%)
              
              
              95,530
              
              
              
              120,677$
              96,495
              
              
              $
              121,906Net
      income per $1,000 invested by limitedpartners
      for entire period-where
      income is compounded and retained
              
              $
              10
              
              
              $
              13-where
      partner receives income in monthlydistributions
              
              $
              10
              
              
              $
              13








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


4


REDWOOD
MORTGAGE INVESTORS VII


(A
California Limited Partnership)


STATEMENTS
OF CASH FLOWS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008(unaudited)








2009
              
              
              2008Cash
      flows from operating activitiesNet
      income
              
              $
              96,495
              
              
              $
              121,906Adjustments
      to reconcile net income to net cash providedby
      operating activitiesProvision
      for losses on loans and real estate
              
              
              1,031
              
              
              
              —Early
      withdrawal penalties credited to income
              
              
              (395
              )
              
              
              (1,132
              )Amortization
      of discount on unsecured loans
              
              
              (2,056
              )
              
              
              (2,056
              )Change
      in operating assets and liabilitiesLoans,
      unsecured
              
              
              13,941
              
              
              
              (14,620
              )Accrued
      interest and late fees
              
              
              (29,728
              )
              
              
              (6,143
              )Advances
      on loan
              
              
              (2,040
              )
              
              
              4,366Receivable
      from affiliate
              
              
              2,876
              
              
              
              (3,746
              )Accounts
      payable and accrued liabilities
              
              
              11,121
              
              
              
              —Payable
      to affiliate
              
              
              5,703
              
              
              
              662Net
      cash provided by operating activities
              
              
              96,948
              
              
              
              99,237Cash
      flows from investing activitiesPrincipal
      collected on loans
              
              
              371,347
              
              
              
              190,225Loans
      originated
              
              
              —
              
              
              
              (148,614
              )Payments
      for development of real estate
              
              
              (1,370
              )
              
              
              —Payments
      on investment in limited liability company
              
              
              (49,725
              )
              
              
              (36,006
              )Proceeds
      from investment in limited liability company
              
              
              —
              
              
              
              2,386Net
      cash provided by investing activities
              
              
              320,252
              
              
              
              7,991Cash
      flows from financing activitiesPartners’
      withdrawals
              
              
              (121,500
              )
              
              
              (158,341
              )Net
      increase (decrease) in cash and cash equivalents
              
              
              295,700
              
              
              
              (51,113
              )Cash
      and cash equivalents – beginning of period
              
              
              183,779
              
              
              
              351,129Cash
      and cash equivalents – end of period
              
              $
              479,479
              
              
              $
              300,016Supplemental
      disclosures of cash flow informationCash
      paid for interest
              
              $
              6,000
              
              
              $
              —








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


5


REDWOOD
MORTGAGE INVESTORS VII


(A
California Limited Partnership)


NOTES
TO FINANCIAL STATEMENTS


MARCH
31, 2009 (unaudited)








NOTE 1 –
GENERAL





In the
opinion of the management of the partnership, the accompanying unaudited
financial statements contain all adjustments, consisting of normal, recurring
adjustments, necessary to present fairly the financial information included
therein.  These financial statements should be read in conjunction
with the audited financial statements included in the partnership’s Form 10-K
for the fiscal year ended December 31, 2008 filed with the Securities and
Exchange Commission.  The results of operations for the three month
period ended March 31, 2009 are not necessarily indicative of the operating
results to be expected for the full year.








NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES





Cash and cash
equivalents





The
partnership places its cash and temporary cash investments with high credit
quality institutions.  Periodically, such investments may be in excess
of federally insured limits.





Loans secured by deeds of
trust





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





If the
probable ultimate recovery of the carrying amount of a loan, with due
consideration for the fair value of collateral, is less than amounts due
according to the contractual terms of the loan agreement, and the shortfall in
the amounts due are significant, the carrying amount of the loan is reduced to
the present value of future cash flows discounted at the loan’s effective
interest rate.  If a loan is collateral dependent, it is valued at the
estimated fair value of the related collateral.





At March
31, 2009 and December 31, 2008, the partnership had four loans past maturity or
more than 90 days past due in interest payments or principal, totaling $882,907
and $691,864, respectively. In addition, accrued interest, late charges and
advances totaled $40,980 and $37,031, respectively.  At March 31,
2009, two loans totaling $514,908 with filed notices of default, were included
in the more than 90 days past due totals.  At December 31, 2008, there
were two loans totaling $323,865 with a filed notice of default.  At
March 31, 2009 and December 31, 2008, as presented in Note 8, the average loan
to appraised value of security based upon appraised values and prior liens at
the time the loans were consummated was 59.05% and 58.60%,
respectively.





If events
or changes in circumstances cause management to have serious doubts about the
collectibility of the contractual payments, a loan may be categorized as
impaired and interest is no longer accrued. Any subsequent payments on impaired
loans are applied to reduce the outstanding loan balances, including accrued
interest and advances.  When loans are considered impaired the
allowance for loan loss is updated to reflect the change in the valuation of
collateral security. The table below summarizes the impaired loans:





As
      of March 31,
              
              
              For
      the three months ended March 31,Number
              
              
              Total
              
              
              Total
              
              
              Impaired
              
              
              Average
              
              
              
              
              
              Interestof
              
              
              Impaired
              
              
              Investment
              
              
              Loans
              
              
              Investment
              
              
              Interest
              
              
              IncomeImpaired
              
              
              Loan
              
              
              Impaired
              
              
              Loss
              
              
              Impaired
              
              
              Income
              
              
              ReceivedLoans
              
              
              Balance
              
              
              Loans
              
              
              Reserve
              
              
              Loans
              
              
              Accrued
              
              
              In
      Cash2009
              
              
              1
              
              
              $
              153,000
              
              
              $
              160,799
              
              
              $
              39,299
              
              
              $
              161,171
              
              
              $
              —
              
              
              $
              —2008
              
              
              —
              
              
              $
              —
              
              
              $
              —
              
              
              $
              —
              
              
              $
              —
              
              
              $
              —
              
              
              $
              —





6


REDWOOD
MORTGAGE INVESTORS VII


(A
California Limited Partnership)


NOTES
TO FINANCIAL STATEMENTS


MARCH
31, 2009 (unaudited)








NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (continued)





Loans unsecured by deeds of
trust





The
partnership had three unsecured loans, net of a discount, totaling $263,296 and
$275,181 at March 31, 2009 and December 31, 2008,
respectively.  Interest is not being accrued as these loans are
considered impaired; however, monthly payments are being received on each
loan.





Allowance for loan
losses





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





The
composition of the allowance for loan losses as of March 31, 2009 and December
31, 2008 was as follows:





March
      31, 2009
              
              
              December
      31, 2008Percent
              
              
              
              
              
              Percentof
      loans
              
              
              
              
              
              of
      loansin
      each
              
              
              
              
              
              in
      eachcategory
              
              
              
              
              
              categoryto
      total
              
              
              
              
              
              to
      totalAmount
              
              
              loans
              
              
              Amount
              
              
              loansBalance
      at end of period applicable to:DomesticReal
      estate – mortgageSingle
      family
              
              $
              60,277
              
              
              
              65
              %
              
              $
              90,876
              
              
              
              59
              %Apartments
              
              
              10,741
              
              
              
              2
              
              
              
              10,744
              
              
              
              2Commercial
              
              
              27,159
              
              
              
              24
              
              
              
              30,792
              
              
              
              28Land
              
              
              12,333
              
              
              
              9
              
              
              
              29,253
              
              
              
              11Total
      real estate – mortgage
              
              $
              110,510
              
              
              
              100
              %
              
              $
              161,665
              
              
              
              100
              %Total
      unsecured loans
              
              $
              109,767
              
              
              
              100
              %
              
              $
              75,228
              
              
              
              100
              %Total
      allowance for losses
              
              $
              220,277
              
              
              
              100
              %
              
              $
              236,893
              
              
              
              100
              %








7


REDWOOD
MORTGAGE INVESTORS VII


(A
California Limited Partnership)


NOTES
TO FINANCIAL STATEMENTS


MARCH
31, 2009 (unaudited)








NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (continued)





Allowance for loan
losses (continued)





Activity
in the allowance for loan losses is as follows for the three months ended March
31, 2009 and 2008:





Three
      Months EndedMarch
      31,2009
              
              
              
              2008Balance
      at beginning of year
              
              $
              236,893
              
              
              $
              386,658Charge-offsDomesticReal
      estate - mortgageSingle
      family
              
              
              —
              
              
              
              —Apartments
              
              
              —
              
              
              
              —Commercial
              
              
              —
              
              
              
              —Land
              
              
              —
              
              
              
              ——
              
              
              
              —RecoveriesDomesticReal
      estate - mortgageSingle
      family
              
              
              —
              
              
              
              —Apartments
              
              
              —
              
              
              
              —Commercial
              
              
              —
              
              
              
              —Land
              
              
              —
              
              
              
              ——
              
              
              
              —Net
      charge-offs
              
              
              —
              
              
              
              —Additions
      charged to operations
              
              
              1,031
              
              
              
              —Transfer
      to real estate held reserve
              
              
              (17,647
              )
              
              
              —Balance
      at end of period
              
              $
              220,277
              
              
              $
              386,658Ratio
      of net charge-offs during the period to averagesecured
      loans outstanding during the period
              
              
              0.00
              %
              
              
              0.00
              %





Real estate
held





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





The
partnership periodically compares the carrying value of real estate to expected
future undiscounted cash flows for the purpose of assessing the recoverability
of the recorded amounts.  If the carrying value exceeds future
undiscounted cash flows, the assets are reduced to fair value.





8


REDWOOD
MORTGAGE INVESTORS VII


(A
California Limited Partnership)


NOTES
TO FINANCIAL STATEMENTS


MARCH
31, 2009 (unaudited)








NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (continued)





Income
taxes





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





Net income per $1,000
invested





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





Management
estimates





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





Reclassifications





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





Late fee
revenue





Late fees
are generally charged at 6% of the monthly installment payment past
due.





Profits and
losses





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





Recently issued accounting
pronouncements





In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51 (SFAS
160).  SFAS 160’s objective is to improve the relevance,
comparability, and transparency of the financial information a reporting entity
provides in its consolidated financial statements by establishing accounting and
reporting standards for the noncontrolling interest in a
subsidiary.  SFAS 160 is effective for fiscal years beginning on or
after December 15, 2008, along with the interim periods within those fiscal
years.  Early adoption is prohibited.  The adoption of SFAS
160 did not have a material impact on the partnership’s financial condition and
results of operations.





9


REDWOOD
MORTGAGE INVESTORS VII


(A
California Limited Partnership)


NOTES
TO FINANCIAL STATEMENTS


MARCH
31, 2009 (unaudited)








NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (continued)





Recently issued accounting
pronouncements (continued)





On
January 1, 2008, the partnership adopted Statement of Financial Accounting
Standards No. 157, Fair Value
Measurements (SFAS 157). SFAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosure requirements for fair
value measurements. The partnership deferred the application of SFAS 157 for
nonfinancial assets and nonfinancial liabilities as provided for by FASB Staff
Position (FSP) FAS 157-2, Effective Date of FASB Statement No. 157. FSP FAS
157-2 defers the effective date of SFAS 157 to fiscal years beginning after
November 15, 2008, and interim periods within those fiscal years for
nonfinancial assets and nonfinancial liabilities, except items that are
recognized or disclosed at fair value in an entity's financial statements on a
recurring basis (at least annually).  The adoption of SFAS 157 did not
have a material effect on the partnership’s results of operations, financial
position or liquidity.





In
October 2008, the FASB issued FSP FAS 157-3, Determining the Fair Value of a
Financial Asset When the Market for that Asset is Not Active, with an
immediate effective date.  The purpose of this release was to provide
further clarification regarding Level 3 inputs and the assumptions management
may make when the market for the asset in not active.  The adoption of
FSP FAS 157-3 did not have a material effect on the partnership’s results of
operations, financial position or liquidity.





In May
2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles (SFAS 162).  SFAS 162 identifies the
sources of accounting principles and the framework for selecting the principles
to be used in the preparation of financial statements presented in conformity
with generally accepted accounting principles in the United
States.  SFAS 162 became effective on November 15,
2008.  The adoption of this statement did not have a material impact
on the partnership’s financial condition and results of operation.





In April
2009, the FASB issued FSP FAS 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly, with an
effective date for interim and annual reporting periods ending after June 15,
2009, with early adoption being permitted.  The purpose of this
release was to provide additional guidance for estimating fair value in
accordance with SFAS 157 (see above), when the volume and level of activity for
the asset or liability have significantly decreased.  This FSP also
includes guidance on identifying circumstances that indicate a transaction is
not orderly.  It is not anticipated that this FSP will have a material
impact on the partnership’s financial condition and results of
operation.





In April
2009, the FASB issued FSP FAS 107-1 and APB 28-1, Interim Disclosure about Fair Value
of Financial Instruments, with an effective date for interim and annual
reporting periods ending after June 15, 2009, with early adoption being
permitted if one also early adopts FSP FAS 157-4.  The purpose of this
release is to require disclosure about fair value of financial instruments for
interim reporting periods of publicly traded companies as well as in annual
financial statements and to require those disclosures in summarized financial
information at interim reporting periods.  It is not anticipated that
this FSP will have a material impact on the partnership’s
disclosures.








10


REDWOOD
MORTGAGE INVESTORS VII


(A
California Limited Partnership)


NOTES
TO FINANCIAL STATEMENTS


MARCH
31, 2009 (unaudited)








NOTE 3 – GENERAL PARTNERS
AND RELATED PARTIES





The
      following are commissions and fees that are paid to the general partners
      and affiliates.





Mortgage brokerage
commissions





For fees
in connection with the review, selection, evaluation, negotiation and extension
of loans, Redwood Mortgage Corp., an affiliate of the general partners, may
collect an amount equivalent to 12% of the loaned amount until 6 months after
the termination date of the offering. Thereafter, loan brokerage commissions
(points) will be limited to an amount not to exceed 4% of the total partnership
assets per year.  The loan brokerage commissions are paid by the
borrowers, and thus, are not an expense of the partnership.





Mortgage servicing
fees





Monthly
mortgage servicing fees of up to 1/8 of 1% (1.5% annual) of the unpaid principal
are paid to Redwood Mortgage Corp., an affiliate of the general partners, based
on the unpaid principal balance of the loan portfolio, or such lesser amount as
is reasonable and customary in the geographic area where the property securing
the mortgage is located. Once a loan is categorized as impaired, mortgage
servicing fees are no longer accrued. Additional servicing fees are recorded
upon the receipt of any subsequent payments on impaired
loans.  Redwood Mortgage Corp. waived $7,307 in mortgage servicing
fees during the first quarter of 2009.





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%
annually).





Other
fees





The
partnership agreement provides for other fees such as reconveyance, mortgage
assumption and mortgage extension fees.  These fees are incurred by
the borrowers and paid to the general partners or their affiliates.





Operating
expenses





The
general partners or their affiliate, Redwood Mortgage Corp., are reimbursed by
the partnership for all operating expenses incurred by them 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.








11


REDWOOD
MORTGAGE INVESTORS VII


(A
California Limited Partnership)


NOTES
TO FINANCIAL STATEMENTS


MARCH
31, 2009 (unaudited)








NOTE 4 – REAL ESTATE
HELD





Periodically,
management reviews the status of the owned properties to evaluate among other
things, their asset classification.  Properties are purchased or
acquired through foreclosure.  Several factors are considered in
determining the classification of owned properties as “real estate held” or
“real estate held for sale”.  These factors include, but are not
limited to, real estate market conditions, status of any required permits,
repair, improvement or development work to be completed, rental and lease income
and investment potential.  Real estate owned is classified as held for
sale in the period in which the criteria of Statement of Financial Accounting
Standards (SFAS) No. 144, Accounting for the Impairment or
Disposal of Ling-Lived Assets, are met.  As a property’s status
changes, reclassifications may occur.





In March
2009, the partnership acquired a parcel of land through
foreclosure.  The partnership’s investment at the time of acquisition
and March 31, 2009 is $212,603.  Secured loans declined by $212,435
and advances declined by $168.  The partnership is currently
evaluating plans for disposition of this property.





During
August 2008, the partnership acquired through foreclosure, a
commercial-agricultural property encumbered by a first deed of trust in the
amount of $500,000 with a private party (see Note 6).  As of March 31,
2009, the partnership’s investment in this property was $634,756, less a reserve
of $10,000.  The partnership is currently evaluating plans for
disposition of this property.





In
December 2004, the partnership acquired land through a deed in lieu of
foreclosure.  At the date of acquisition, the partnership’s investment
totaled $1,752,836 including accrued interest and advances.  During
2006, management established a $190,310 reserve against this property to reduce
the carrying amount to management’s estimate of the ultimate net realizable
value of the property.  One of the parcels comprising the property was
sold during 2006 for $336,652.  The partnership incurred a loss of
$28,336 on this sale, which was fully reserved.  In March 2009, the
reserve was increased by $7,647.  At March 31, 2009, the partnership’s
total investment in this property was $1,470,655, less a reserve of
$169,621.





The
following schedule reflects the costs of real estate acquired through
foreclosure and the recorded reductions to estimated fair values, including
estimated costs to sell as of March 31, 2009 and December 31, 2008:





March
      31,
              
              
              December
      31,2009
              
              
              
              2008Costs
      of properties
              
              $
              2,318,014
              
              
              $
              2,104,041Reduction
      in value
              
              
              (179,621
              )
              
              
              (161,974
              )Real
      estate held for sale, net
              
              $
              2,138,393
              
              
              $
              1,942,067








NOTE 5 – INVESTMENT IN
LIMITED LIABILITY COMPANY





In
February 2005, the partnership acquired through foreclosure a multi-unit
property located in an upscale neighborhood in San Francisco.  At the
time the partnership took ownership of the property, the partnership’s
investment totaled $836,702 including accrued interest and
advances.  This property is jointly owned with three other affiliated
partnerships.  Upon acquisition the partnership transferred its
interest (principally land and building) to Larkin Property Company, LLC
(“Larkin”).  The partnership owns 8% of the interests in Larkin and
92% is owned by three other affiliates of the partnership.  No
allowance for loss has been set aside as management believes the fair value of
the property exceeds the combined partnerships’ investment in the
property.  The partnership intends to undertake additional
improvements to the property.  As of March 31, 2009, the partnership
has capitalized $282,900 in costs, net of recovery in 2006 from the guarantors
of the original loan, related to this property.  At March 31, 2009,
the partnership’s investment in Larkin totaled $1,119,602.


12


REDWOOD
MORTGAGE INVESTORS VII


(A
California Limited Partnership)


NOTES
TO FINANCIAL STATEMENTS


MARCH
31, 2009 (unaudited)








NOTE 6 – MORTGAGE
PAYABLE





In August
2008, the partnership obtained through foreclosure a property that was subject
to an interest only first lien of $500,000 with a 7.20% interest rate and a
maturity date of April 1, 2011.








NOTE 7 – FAIR
VALUE





SFAS 157
defines fair value as the exchange price that would be received for an asset or
paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date. The partnership determines the fair
values of its assets and liabilities based on the fair value hierarchy
established in SFAS 157. The standard describes three levels of inputs that may
be used to measure fair value (Level 1, Level 2 and Level 3). Level 1 inputs are
quoted prices (unadjusted) in active markets for identical assets or liabilities
that the partnership has the ability to access at the measurement date. An
active market is a market in which transactions occur with sufficient frequency
and volume to provide pricing information on an ongoing basis. Level 2 inputs
are inputs other than quoted prices that are observable for the asset or
liability, either directly or indirectly. Level 3 inputs are unobservable inputs
for the asset or liability. Unobservable inputs reflect the partnership’s own
assumptions about the assumptions market participants would use in pricing the
asset or liability (including assumptions about risk). Unobservable inputs are
developed based on the best information available in the circumstances and may
include the partnership’s own data.




The
partnership does not record loans at fair value on a recurring
basis.




The
following table reflects assets and liabilities measured at fair value on a
non-recurring basis as of March 31, 2009:





Fair
      Value Measurement at Report Date UsingQuoted
      Prices
              
              
              Significantin
      Active
              
              
              Other
              
              
              SignificantMarkets
      for
              
              
              Observable
              
              
              Unobservable
              
              
              TotalIdentical
      Assets
              
              
              Inputs
              
              
              Inputs
              
              
              as
      ofItem
              
              (Level
      1)
              
              
              (Level
      2)
              
              
              (Level
      3)
              
              
              03/31/2009Impaired
      secured loans
              
              $
              —
              
              
              $
              —
              
              
              $
              121,500
              
              
              $
              121,500Unsecured
      loans
              
              $
              —
              
              
              $
              —
              
              
              $
              153,528
              
              
              $
              153,528Real
      estate owned
              
              $
              —
              
              
              $
              —
              
              
              $
              1,925,790
              
              
              $
              1,925,790





13


REDWOOD
MORTGAGE INVESTORS VII


(A
California Limited Partnership)


NOTES
TO FINANCIAL STATEMENTS


MARCH
31, 2009 (unaudited)








NOTE 7 – FAIR VALUE
(continued)




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




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





(b)
            Secured
      loans (Level 2).  The fair value of the non-impaired loans of
      $5,684,000 and $6,393,000 at March 31, 2009 and December 31, 2008,
      respectively, was estimated based upon projected cash flows discounted at
      the estimated current interest rates at which similar loans would be
      made.  The applicable amount of the allowance for loan losses
      along with accrued interest and advances related thereto should also be
      considered in evaluating the fair value versus the carrying value. For
      loans in which a specific allowance is established based on the fair value
      of the collateral, the partnership records the loan as nonrecurring Level
      2 if the fair value of the collateral is based on an observable market
      price or a current appraised value.  If an appraised value is
      not available or the fair value of the collateral is considered impaired
      below the appraised value and there is no observable market price, the
      partnership records the loan as nonrecurring Level
  3.





(c)
            Unsecured
      loans (Level 3).  The carrying amount equals fair
      value.  Unsecured loans are valued at their principal less any
      discount or loss reserves established by management after taking into
      account the borrower’s creditworthiness and ability to repay the
      loan.





(d)
            Real
      estate owned (Level 3).   At the time of foreclosure, real
      estate owned is recorded at the lower of the recorded investment in the
      loan, plus any senior indebtedness, or at the property’s estimated fair
      value, less estimated costs to sell, as applicable. The partnership
      periodically compares the carrying value of real estate to expected
      undiscounted future cash flows for the purpose of assessing the
      recoverability of the recorded amounts.  If the carrying value
      exceeds future undiscounted cash flows, the assets are reduced to
      estimated fair value.








14


REDWOOD
MORTGAGE INVESTORS VII


(A
California Limited Partnership)


NOTES
TO FINANCIAL STATEMENTS


MARCH
31, 2009 (unaudited)








NOTE 8 – ASSET
CONCENTRATIONS AND CHARACTERISTICS





At March
31, 2009 and December 31, 2008, the loans secured by recorded deeds of trust had
the following characteristics:





March
      31,
              
              
              December
      31,2009
              
              
              2008Number
      of secured loans outstanding
              
              
              27
              
              
              
              29Total
      secured loans outstanding
              
              $
              5,865,081
              
              
              $
              6,425,871Average
      secured loan outstanding
              
              $
              217,225
              
              
              $
              221,582Average
      secured loan as percent of total secured loans
              
              
              3.70
              %
              
              
              3.45
              %Average
      secured loan as percent of partners’ capital
              
              
              2.37
              %
              
              
              2.41
              %Largest
      secured loan outstanding
              
              $
              500,000
              
              
              $
              500,000Largest
      secured loan as percent of total secured loans
              
              
              8.53
              %
              
              
              7.78
              %Largest
      secured loan as percent of partners’ capital
              
              
              5.46
              %
              
              
              5.44
              %Largest
      secured loan as percent of total assets
              
              
              5.12
              %
              
              
              5.11
              %Number
      of counties where security is located (all California)
              
              
              17
              
              
              
              18Largest
      percentage of secured loans in one county
              
              
              17.21
              %
              
              
              15.73
              %Number
      of secured loans in foreclosure status
              
              
              2
              
              
              
              2Amounts
      of secured loans in foreclosure
              
              $
              514,908
              
              
              $
              323,865





At times,
a specific loan may increase above 10% of the secured loan portfolio or
partnership assets as the loan portfolio and assets of the partnership decrease
due to limited partner withdrawals and/or loan payoffs.





The
following categories of secured loans were held at March 31, 2009 and December
31, 2008:





March
      31,
              
              
              December
      31,2009
              
              
              2008First
      trust deeds
              
              $
              4,719,676
              
              
              $
              5,279,823Second
      trust deeds
              
              
              1,056,519
              
              
              
              1,056,999Third
      trust deeds
              
              
              88,886
              
              
              
              89,049Total
      loans
              
              
              5,865,081
              
              
              
              6,425,871Prior
      liens due other lenders at time of loan
              
              
              1,666,711
              
              
              
              1,666,711Total
      debt
              
              $
              7,531,792
              
              
              $
              8,092,582Appraised
      property value at time of loan
              
              $
              12,754,561
              
              
              $
              13,809,106Total
      loans as percent of appraisals based on appraisedvalues
      and prior liens at time loan was consummated
              
              
              59.05
              %
              
              
              58.60
              %Loans
      by type of propertySingle
      family
              
              $
              3,804,815
              
              
              $
              3,811,235Apartments
              
              
              98,835
              
              
              
              99,233Commercial
              
              
              1,430,486
              
              
              
              1,793,846Land
              
              
              530,945
              
              
              
              721,557$
              5,865,081
              
              
              $
              6,425,871


15


REDWOOD
MORTGAGE INVESTORS VII


(A
California Limited Partnership)


NOTES
TO FINANCIAL STATEMENTS


MARCH
31, 2009 (unaudited)








NOTE 8 – ASSET
CONCENTRATIONS AND CHARACTERISTICS (continued)





Scheduled
maturity dates of secured loans as of March 31, 2009 are as
follows:




Year Ending December 31,2009
              
              $
              443,5352010
              
              
              1,456,4022011
              
              
              866,7132012
              
              
              1,395,8892013
              
              
              668,737Thereafter
              
              
              1,033,805$
              5,865,081





One loan
totaling $214,999 was past maturity at March 31, 2009.








NOTE 9 – COMMITMENTS AND
CONTINGENCIES





Workout
agreements





From time
to time, the partnership negotiates various contractual workout agreements with
borrowers.  Under the terms of these workout agreements the
partnership is not obligated to make any additional monetary advances for the
maintenance or repair of the collateral securing the loans. As of March 31, 2009
and December 31, 2008, there were two and one loans respectively in workout
agreements.





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.








16


Part
I – Item 2.





MANAGEMENT
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OF THE PARTNERSHIP





Forward-Looking
Statements.





Certain
statements in this Report on Form 10-Q which are not historical facts may be
considered forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, including statements regarding the partnership’s
expectations, hopes, intentions, beliefs and strategies regarding the
future.  Forward-looking statements include statements regarding
future interest rates and economic conditions and their effect on the
partnership and its assets, trends in the California real estate market,
estimates as to the allowance for loan losses, estimates of future limited
partner withdrawals, 2009 annualized yield estimates, additional foreclosures in
2009, expectations regarding the level of loan delinquencies, beliefs relating
to the impact on the partnership from current economic conditions and trends in
the financial and credit markets, beliefs regarding the partnership’s ability to
recover its investment in certain properties, beliefs regarding the effect of
borrower foreclosures on liquidity, the use of excess cash flow and the
intention not to sell the partnership’s loan portfolio.  Actual
results may be materially different from what is projected by such
forward-looking statements.  Factors that might cause such a
difference include unexpected changes in economic conditions and interest rates,
the impact of competition and competitive pricing and downturns in the real
estate markets in which the Company has made loans.  All
forward-looking statements and reasons why results may differ included in this
Form 10-Q are made as of the date hereof, and we assume no obligation to update
any such forward-looking statement or reason why actual results may
differ.





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 dates and revenues and expenses for the
reporting periods.  Such estimates relate principally to the
determination of (1) the allowance for loan losses (i.e. the amount of allowance
established against loans receivable as an estimate of potential loan losses)
including the accrued interest and advances that are estimated to be
unrecoverable based on estimates of amounts to be collected plus estimates of
the value of the property as collateral and (2) the valuation of real estate
held.  At March 31, 2009, the partnership owned five pieces of real
property.





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





If the
probable ultimate recovery of the carrying amount of a loan, with due
consideration for the fair value of collateral, is less than amounts due
according to the contractual terms of the loan agreement and the shortfall in
the amounts due is not insignificant, the carrying amount of the investment will
be reduced to the present value of future cash flows discounted at the loan’s
effective interest rate.  If a loan is collateral dependent, it is
valued at the estimated fair value of the related collateral.  If
events and or changes in circumstances cause management to have serious doubts
about the further collectibility of the contractual payments, a loan may be
categorized as impaired and interest is no longer accrued.  Any
subsequent payments on impaired loans are applied to reduce the outstanding loan
balances including accrued interest and advances.





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





17


Related
Parties.





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





·
            Mortgage
      Brokerage CommissionsFor fees in connection with
      the review, selection, evaluation, negotiation and extension of loans,
      Redwood Mortgage Corp. 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.  Loan brokerage commissions paid by the borrowers
      were $0 and $6,805 for the three month periods ended March 31, 2009 and
      2008, respectively.





·
            Mortgage
      Servicing Fees   Monthly mortgage servicing fees of
      up to 1/8 of 1% (1.5% on an annual basis) of the unpaid principal of the
      partnership’s loans are paid to Redwood Mortgage Corp. or such lesser
      amount as is reasonable and customary in the geographic area where the
      property securing the mortgage is located.  The table below
      summarizes the mortgage servicing fees paid to Redwood Mortgage Corp. for
      the three month periods ended March 31, 2009 and
  2008.





March
      31,
              
              
              March
      31,2009
              
              
              2008Maximum
      chargeable
              
              $
              21,921
              
              
              $
              22,794Waived
              
              
              (7,307
              )
              
              
              (22,794
              )Net
      charged
              
              $
              14,614
              
              
              $
              —








·
            Asset
      Management FeesThe general partners receive
      monthly fees for managing the partnership’s portfolio and operations of up
      to 1/32 of 1% of the ‘net asset value’ (3/8
      of 1% on an annual basis).  The general partners have
      historically not charged the maximum allowable rate.  The table
      below summarizes the asset management fees paid to the general partners
      for the three month periods ended March 31, 2009 and
  2008.





March
      31,
              
              
              March
      31,2009
              
              
              2008Maximum
      chargeable
              
              $
              8,625
              
              
              $
              8,709Waived
              
              
              (5,750
              )
              
              
              (8,709
              )Net
      charged
              
              $
              2,875
              
              
              $
              —





·
            Other
      Fees   The partnership agreement provides the
      general partners may receive other fees such as processing and escrow,
      reconveyance, mortgage assumption and mortgage extension
      fees.  Such fees are incurred by the borrowers and are paid to
      the general partners.  Such fees aggregated $15 and $480 for the
      three month periods ended March 31, 2009 and 2008,
      respectively.





·
            Income and
      LossesAll income and losses are credited or
      charged to partners in relation to their respective partnership
      interests.  The allocation to the general partners (combined) is
      a total of 1%, which was $965 and $1,229 for the three month periods ended
      March 31, 2009 and 2008,
respectively.


18





·
            Operating
      ExpensesAn 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
      reimbursement was $3,045 and $0 for the three month periods ended March
      31, 2009 and 2008, respectively.  For 2008, Redwood Mortgage
      Corp. waived $3,052 of costs.





·
            Contributed
      CapitalThe general partners jointly and severally
      contribute 1/10 of 1% in cash contributions as proceeds from the offerings
      are received from the limited partners.  As of March 31, 2009
      and 2008, a general partner, Gymno Corporation, had contributed $11,973 as
      capital in accordance with the partnership
  agreement.





Results
of Operations.





Changes
in the partnership’s operating results are tabulated for reference and discussed
below:





Changes
      during the three months ended March 31, 2009 versus 2008Dollars
              
              
              PercentRevenueInterest
      on loans
              
              $
              1,730
              
              
              
              1
              
              %Other
      interest
              
              
              (1,172
              )
              
              
              (64
              )Late
      fees
              
              
              (239
              )
              
              
              (34
              )Other
              
              
              (721
              )
              
              
              (49
              )Total
      revenues
              
              
              (402
              )
              
              
              —ExpensesMortgage
      servicing fees
              
              
              14,614
              
              
              
              —Clerical
      costs through Redwood Mortgage Corp.
              
              
              3,045
              
              
              
              —Asset
      management fees
              
              
              2,875
              
              
              
              —Provision
      for losses on loans and real estate
              
              
              1,031
              
              
              
              —Professional
      services
              
              
              (2,525
              )
              
              
              (14
              )Other
              
              
              5,969
              
              
              
              81Total
      expenses
              
              
              25,009
              
              
              
              97Net
      income
              
              $
              (25,411
              )
              
              
              (21
              )
              %





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





The
increase in interest on loans for the three month period ended March 31, 2009 as
compared to the same period in 2008 was due to an increase in the average loan
portfolio balance, offset by a decrease in the average interest
rate.  Each period includes $2,056 in income gained through
amortization of discount on unsecured notes, which has been eliminated in the
calculation of the average interest rate.  The table below recaps
these averages for the three month periods.





AverageInterestAverage
              
              RateSecured
              
              AdjustedLoan
              
              ForYear
              
              Balance
              
              Discount2008
              
              $
              6,099,002
              
              9.29
              %2009
              
              $
              6,423,300
              
              8.93
              %





19


The
decrease in other interest for the three month period ended March 31, 2009 as
compared to 2008 was due to a lower average balance of deposits in the
interest-bearing accounts and a lower average rate of interest
earned.  The table below summarizes the components in this
area.





AverageInterest-
              
              AverageBearing
              
              InterestYear
              
              Balance
              
              Rate2008
              
              $
              314,217
              
              2.32
              %2009
              
              $
              243,562
              
              1.07
              %





The
decrease in other revenue for the three month period ended March 31, 2009 as
compared to the same period in 2008 was due to a $737 reduction in early
withdrawal penalties.





Mortgage
servicing fees increased for the three month period ended March 31, 2009 as
compared to the same period in 2008.  For 2009, Redwood Mortgage Corp.
waived one-third of these fees, and for 2008 had waived all of these
fees.





The
increase in clerical costs through Redwood Mortgage Corp. for the three month
period ended March 31, 2009 as compared to the same period in 2008 was due to
Redwood Mortgage Corp. waiving $3,052 of fees in 2008.





Asset
management fees increased for the three month period ended March 31, 2009 as
compared to the same period in 2008, due to Redwood Mortgage Corp. waiving 100%
of the fees in 2008 and two-thirds of the fees in 2009.





The
increase in the provision for losses on loans and real estate held for the three
month period ended March 31, 2009 as compared to 2008 was due to management’s
decision to increase the allowance for losses to reflect the current market
conditions.





The
decrease in professional services for the three month period ended March 31,
2009 as compared to the same period in 2008, was due to general decreases in
professional costs for legal services, audits, tax return processing and the
timing of billing.





The
increase in other expenses for the three month period ended March 31, 2009 as
compared to the same period in 2008, was due to expenses related to the two
newest pieces of real estate held, which were not owned at this time in
2008.





Partnership
capital decreased from $9,185,575 at December 31, 2008 to $9,160,175 at March
31, 2009.  The decrease is attributable to capital liquidations
exceeding earnings reinvested.  The partnership capital declined
$81,321 in 2008 and is anticipated to decrease at a similar rate in
2009.





The
partnership began funding loans in December 1989.  The aggregate
principal balance of the partnership’s secured loans outstanding as of March 31,
2009 and December 31, 2008 were $5,865,081 and $6,425,871,
respectively.





Delinquencies
on partnership loans are within the normal historical range of the general
partners’ expectations, based upon their experience in managing similar
partnerships over the last twenty-eight years.  Foreclosures are a
normal aspect of partnership operations and the general partners anticipate they
will not have a material effect on liquidity.  As of March 31, 2009,
there were two loans with a filed notice of default.





20


Cash is
generated from borrower payments of interest, principal, loan payoffs and from
the partnership’s sale of real estate owned properties.  Currently the
credit and financial markets are facing a significant and prolonged
disruption.  As a result, loans are not readily available to borrowers
or purchasers of real estate.  These credit constraints may impact the
partnership and our borrowers’ ability to sell properties or refinance their
loans in the event they have difficulty making loan payments or their loan
matures.  A slow down or reduction in loan repayments would likely
reduce the partnership’s cash flows and restrict the partnership’s ability to
invest in new loans or provide earnings and capital
distributions.  Excess cash flow is invested in new loan
opportunities, when available, and used for other partnership
business.





Allowance
for Losses.





The
general partners periodically review the loan portfolio, examining the status of
delinquencies, the underlying collateral securing these loans, real estate held
expenses, sales activities, and borrower’s payment records and other data
relating to the loan portfolio.  Data on the local real estate market
and on the national and local economy are studied.  Based upon this
and other information, the allowance for loan losses is increased or
decreased.  Borrower foreclosures are a normal aspect of partnership
operations.  The partnership is not a credit based lender and hence
while it reviews the credit history and income of borrowers, and if applicable,
the income from income producing properties, the general partners expect the
partnership will on occasion take back real estate security.  At March
31, 2009 the partnership’s loan portfolio had four loans past maturity or past
due 90 days or more in interest payments totaling $882,907.  As of
March 31, 2009 the partnership had one loan totaling $214,999, past
maturity.  The partnership had two filed notices of default totaling
$514,908, at March 31, 2009.  The partnership occasionally enters into
workout agreements with borrowers who are past maturity or delinquent in their
regular payments.  Two of the partnership’s loans totaling $476,821
were subject to a workout agreement as of March 31, 2009.  Typically,
a workout agreement allows the borrower to extend the maturity date of the
balloon payment and/or allows the borrower to make current monthly payments
while deferring for periods of time, past due payments, or allows time to pay
the loan in full.  These workout agreements and foreclosures generally
exist within our loan portfolio to greater or lesser degrees, depending
primarily on the health of the economy.  The partnership has three
unsecured loans totaling $263,296 net of a discount.  These unsecured
loans are considered impaired, however regular payments are being made on all
three loans.  Management expects the number of foreclosures and
workout agreements will rise during difficult times and conversely fall during
good economic times.  These workouts and delinquencies have been
considered when management arrived at an appropriate allowance for loan losses
and based on our experience, are reflective of our loan marketplace
segment.  Because of the number of variables involved, the magnitude
of possible swings and the general partners’ inability to control many of these
factors, actual results may and do sometimes differ significantly from estimates
made by the general partners.





Management
made a provision of $1,031 and $0 to the loan loss reserve during the three
month periods ended March 31, 2009 and 2008, respectively.  The
allowance for loan loss reserve of $220,277 and $236,893 as of March 31, 2009
and December 31, 2008, respectively, is considered to be adequate for the total
net loan portfolio balances of $6,128,377 and $6,701,052,
respectively.





PORTFOLIO
REVIEW





Loan
Portfolio





The
partnership’s loan portfolio consists primarily of short-term (one to five
years), fixed rate loans secured by real estate.  The majority of the
real estate is located in the nine San Francisco Bay Area counties (San Mateo,
Santa Clara, Alameda, San Francisco, Napa, Solano, Sonoma, Marin and Contra
Costa).





21


As of
March 31, 2009 and 2008, the partnership held 27 and 25 secured loans in the
following locations and categories:





March
      31,2009
              
              
              2008Dollars
              
              
              Percent
              
              
              Dollars
              
              
              PercentLocationSan
      Francisco Bay Area
              
              $
              3,652,401
              
              
              
              62
              %
              
              $
              4,568,167
              
              
              
              74
              %Other
      Northern California counties
              
              
              1,360,818
              
              
              
              23
              
              
              
              963,322
              
              
              
              16Southern
      California counties
              
              
              851,862
              
              
              
              15
              
              
              
              629,422
              
              
              
              10Total
              
              $
              5,865,081
              
              
              
              100
              %
              
              $
              6,160,911
              
              
              
              100
              %Property
      typeSingle
      Family
              
              $
              3,804,815
              
              
              
              65
              %
              
              $
              2,754,639
              
              
              
              45
              %Apartments
              
              
              98,835
              
              
              
              2
              
              
              
              695,625
              
              
              
              11Commercial
              
              
              1,430,486
              
              
              
              24
              
              
              
              2,292,668
              
              
              
              37Land
              
              
              530,945
              
              
              
              9
              
              
              
              417,979
              
              
              
              7Total
              
              $
              5,865,081
              
              
              
              100
              %
              
              $
              6,160,911
              
              
              
              100
              %





The
following table sets forth the priorities, asset concentrations and maturities
of the secured loans held by the partnership as of March 31, 2009:





#
      of Loans
              
              Amount
              
              PercentFirst
      trust deeds
              22
              
              $
              4,719,676
              
              80
              %Second
      trust deeds
              4
              
              
              1,056,519
              
              18
              %Third
      trust deeds
              1
              
              
              88,886
              
              2
              %Total
              27
              
              $
              5,865,081
              
              100
              %Maturing
      prior to 12/31/09
              2
              
              $
              443,535
              
              7
              %Maturing
      during 2010
              5
              
              
              1,456,402
              
              25
              %Maturing
      during 2011
              4
              
              
              866,713
              
              15
              %Maturing
      after 12/31/11
              16
              
              
              3,098,431
              
              53
              %Total
              27
              
              $
              5,865,081
              
              100
              %Average
      loan
              
              
              $
              217,225
              
              3.70
              %Largest
      loan
              
              
              
              500,000
              
              8.53
              %Smallest
      loan
              
              
              
              88,886
              
              1.52
              %Average
      loan-to-value, based upon appraisalsand
      senior liens at date of inception of loan
              
              
              
              
              
              59.05
              %





The
partnership’s largest loan in the principal amount of $500,000 represents 8.53%
of outstanding secured loans and 5.12% of partnership assets.  At
times, loans may increase above 10% of the secured loan portfolio or partnership
assets as the loan portfolio and assets of the partnership decrease due to loan
payoffs and/or limited partner withdrawals.





22


Liquidity and Capital
Resources.





The
partnership relies upon loan payoffs, borrowers’ mortgage payments and the sale
of real estate owned for the source of funds for loans.  Recently,
mortgage interest rates have decreased somewhat from those available at the
inception of the partnership.  If interest rates were to increase
substantially, the yield of the partnership’s loans may provide lower yields
than other comparable debt-related investments.  Additionally, since
the partnership has made primarily fixed rate loans, if interest rates were to
rise, the likely result would be a slower prepayment rate for the
partnership.  This could cause a lower degree of liquidity as well as
a slowdown in the ability of the partnership to invest in loans at the then
current interest rates.  Conversely, in the event interest rates were
to decline, the partnership could experience significant borrower prepayments,
which, if the partnership can only obtain the then existing lower rates of
interest may cause a dilution of the partnership’s yield on loans, thereby
lowering the partnership’s overall yield to the limited
partners.  Cash is generated from borrower payments of interest,
principal, loan payoffs and from the partnership’s sale of real estate owned
properties.  Currently the credit and financial markets are facing a
significant and prolonged disruption.  As a result, loans are not
readily available to borrowers or purchasers of real estate.  These
credit constraints may impact the partnership and our borrowers’ ability to sell
properties or refinance their loans in the event they have difficulty making
loan payments or their loan matures.  A slow down or reduction in loan
repayments would likely reduce the partnership’s cash flows and restrict the
partnership’s ability to invest in new loans or provide earnings and capital
distributions.  Excess cash flow is invested in new loan
opportunities, when available, and used for other partnership
business.





At the
time of subscription to the partnership, limited partners made a decision to
either take distributions of earnings monthly, quarterly or annually or to
compound earnings in their capital account.  The table below
summarizes these allocation elections. As of March 31, 2009 and 2008, limited
partners electing to withdraw earnings represented 39% and 39%,
respectively.





Three
      months ended March 31,2009
              
              2008Distributing
              
              $
              37,000
              
              
              $
              47,072Compounding
              
              
              58,530
              
              
              
              74,598Total
              
              $
              95,530
              
              
              $
              121,670





The
partnership also allows the limited partners to withdraw their capital account
subject to certain limitations and penalties (see liquidation provisions of
partnership agreement).  These withdrawals are within the normally
anticipated range the general partners would expect in their experience in this
and other partnerships.  The general partners expect a small
percentage of limited partners will elect to liquidate their capital accounts
over one year with a 10% and/or 8% early withdrawal penalty.  In
originally conceiving the partnership, the general partners wanted to provide
limited partners needing their capital returned a degree of
liquidity.  Generally, limited partners electing to withdraw over one
year need to liquidate investments to raise cash.  The demand the
partnership is experiencing in withdrawals by limited partners electing a one
year liquidation program represents a small percentage of limited partner
capital as of March 31, 2009 and 2008, respectively, and is expected by the
general partners to commonly occur at these levels.





After a
five year hold period has passed, limited partners may withdraw their capital
account without penalty.  The table below sets forth actual
liquidations for the past three months:





Three
      months ended March 31,2009
              
              2008Capital
      liquidations – without penalty
              
              $
              79,172
              
              
              $
              97,362Capital
      liquidations – subject to penalty
              
              
              4,935
              
              
              
              14,150Total
              
              $
              84,107
              
              
              $
              111,512





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





23


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 each
investor’s capital account bears to the total amount of all investor capital
accounts then outstanding.  The capital account balance of each
investor should be included on any FINRA member client account statement in
providing a per Unit estimated value of the client’s investment in the
partnership in accordance with NASD Rule 2340.





While the
general partners have set an estimated value for the 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 Units and
none is likely to develop.  Thus, there is no certainty the Units can
be sold at a price equal to the stated value of the capital
account.  Furthermore, the ability of an investor to liquidate his or
her investment is limited subject to certain liquidation rights provided by the
partnership, which may include early withdrawal penalties (See the section of
the Prospectus entitled “Risk Factors - Purchase of Units is a long term
investment”).





Current
Economic Conditions.





The
partnership makes secured mortgage loans in California with the majority of its
lending concentrated in the San Francisco Bay Area and its outlying
communities.  The economic health of California and, in particular,
the San Francisco Bay Area, plays a significant role in the performance of the
real estate industry and property values, which provide the underlying
collateral for our loans.  Beginning in December 2007, the United
States is experiencing its most severe and prolonged economic recession in more
than 50 years.  The depth and intensity of this recession increased
significantly during the fourth quarter of 2008 and continued through the first
quarter of 2009.  A proximate cause of the financial downturn has been
the rise in residential real estate values that occurred during 2003 to 2006 and
the subsequent steep declines in residential real estate values experienced in
many real estate markets.  As residential real estate values declined,
borrowers that had obtained subprime mortgages began to default on their
mortgage obligations in higher than normal percentages.  These
defaults were due to a variety of reasons, including the borrowers’ inability to
manage their mortgage payments, dramatic increases in monthly mortgage payments
from adjustable rate mortgage loans, stricter underwriting standards limiting
refinance options and reduced equity.  As borrowers defaulted on their
loans in record numbers, those lenders that relied on their ability to sell the
mortgage loans they had funded in order to provide further lending capital
resources found themselves unable to do so.  The inability of this
type of lender to sell their loans to replenish funds has eliminated many of
these lenders.  This has left the primary sources for lending capital
in the mortgage industry to be lenders underwriting and selling their loans to
Fannie Mae and Freddie Mac or loans being funded by large, well-capitalized
portfolio lenders.  In all respects, money available for real estate
lending has been greatly curtailed.  In addition to less availability
of money for real estate lending, the surviving lenders have been reluctant to
make loans secured by real estate in a market with falling values.  In
an attempt to compensate for the increased risk, lenders have both increased
underwriting standards as well as eliminated a wide variety of lending
programs.  These actions have significantly reduced the number of
potential borrowers for both residential and commercial property loans and
contributed to a reduced demand for real estate in general.





During
the current recession, many events have buffeted the United States economy, the
financial system and the business sector.  Some of these events were:
the failure of brokerage firm Lehman Brothers, the forced merger of the
brokerage firm Bear Stearns, the governmental bailout of insurance giant AIG,
the government takeover of both Fannie Mae and Freddie Mac (the largest holders
of residential mortgages in the United States), the merger of Bank of America
with Merrill Lynch and Countrywide (the third largest holder of residential
mortgages in the United States), the forced merger of Wachovia Bank with Wells
Fargo Bank, the takeover in 2009 of over 25 banks by the FDIC, governmental
financial assistance provided to United States automakers, the eventual
bankruptcy of Chrysler Corporation and the potential bankruptcy of General
Motors, and historic write downs of mortgages held by banks.  These
events have exposed the financial system to increased risks and decreased
consumer confidence.





24


In
response to the turmoil in the financial markets and to help bolster the
financial system and the economy, the United States government, through the
Federal Reserve and Treasury, adopted many measures.  Some of these
measures were: two financial stimulus packages, enactment of The Troubled Asset
Relief Program to provide capital to financial institutions, reductions to the
Federal Funds Rate to a range of 0.00 percent to 0.25 percent, and enactment of
the Emergency Economic Stabilization Act.  These actions and any
future actions will take time to produce positive results.





The
effects of this recession have included reduced gross domestic product (GDP),
high unemployment, lower business profits, lower real estate values, restricted
credit markets, and numerous bank and business entity failures.





The
change to the United States GDP for the third and fourth quarters of 2008 and
the first quarter of 2009 has been negative 0.5 percent, negative 6.3 percent
and negative 6.1 percent, respectively.  The deterioration of GDP from
the third quarter of 2008 to negative GDP in excess of six percent for the
fourth quarter of 2008 and the first quarter of 2009 demonstrates how rapidly
and deeply the economy has faltered over the last six months.





As
economic output has rapidly declined, unemployment has risen
significantly.  Both the United States and California have seen rapid
and dramatic rises in their unemployment rates.  The national
unemployment rate rose from 5.1 percent in March 2008 to 8.5 percent in March
2009.  The California unemployment rate rose even more dramatically,
from 6.4 percent in March 2008 to 11.2 percent in March
2009.  Unemployment in both California and the entire United States is
anticipated to rise in the upcoming months and perhaps throughout
2009.  The escalation of unemployment has caused borrowers losing jobs
to have a difficult time meeting their financial obligations. Those with jobs
are very concerned about their job security and hence have lowered their
confidence in their own financial circumstances.





Mortgage
interest rates are a key factor in the affordability of real
estate.  The higher the interest rate, the less affordable real estate
becomes.  Interest rates are affected by inflation which was low
during 2008 at 0.1 percent and increased somewhat to 2.2 percent for the three
months ended March 2009.  Mortgage interest rates are also affected by
the prevailing long term interest rates, particularly the United States 10-year
treasury securities.  Today, both inflation and the 10-year treasury
securities are near historic lows.  These low rates are reflected in
the near historic low 30-year fixed-rate mortgage interest rate reported by
Freddie Mac as averaging 4.84 percent with an average of 0.7 percent origination
points for the week ended May 7, 2009.  During the same period in
2008, the 30-year fixed rate mortgage averaged 6.05 percent.  The
decline in interest rates has helped homeowners qualify for refinancing of
mortgages and have contributed to lower monthly payments and increased
affordability for those seeking to purchase residential
property.  This improved affordability is one likely reason why
residential real estate sales volumes nationally have been increasing since July
of 2008.  March 2009 California sales volumes of new and resale houses
and condominiums rose 47.4 percent from March 2008.





Median
home prices have declined from their highs in 2005 and 2006.  The
median sales price of an existing California home was $223,000 in March 2009,
representing a 37.7 percent drop from $358,000 in March 2008.  These
declines in value have caused great difficulties for residential owners and
their lenders.  Owners desiring to sell property often must face
selling at prices less than their acquisition cost, resulting in a loss to the
owner.  Lenders on properties often find the decline in values has
tightened their available equity, or in some instances, resulted in their loan
being larger than the value of the property securing their loan.  In
the current environment, borrowers owning residential properties may find it
difficult to refinance or sell their properties.  This situation may
cause or even force borrowers to hold their existing financing longer than they
normally would have chosen or originally anticipated due to the lack of other
financing alternatives or the inability to sell and pay off the existing debt
through a property sale.





Should
borrowers encounter difficulty in making their mortgage payments or paying off a
loan at its maturity, the lender will have to decide whether to work with the
borrowers to assist them through a period of financial difficulty or proceed
with legal remedies under the loan documents, such as foreclosure of the
property.  Slow and longer sales periods and often lower property
values, coupled with a general lack of financing alternatives and tough
underwriting standards have forced many borrowers and lenders to make these
difficult choices.





25


In light
of the current economic conditions, the partnership has been actively increasing
its provision for losses (the “loan loss reserve”), and has taken actions to
protect the capital of its investors.  Nevertheless, the partnership
expects increased loan delinquencies, lower levels of loan repayments, increased
numbers of loan extensions, workouts and foreclosures as some borrowers are
unable to meet their financial obligations.  The partnership
anticipates that it may realize losses should it take back the real estate
securing a loan and immediately sell the property.  The partnership
may also decide to accept less than amounts owed on a mortgage to facilitate the
sale of real estate at its then current market value; this is commonly known as
a short sale.  We believe, in some cases, it may be beneficial to the
partnership to hold a property as an investment if the property has the
potential to generate income from rents or the value of the property can be
enhanced through improvements.  Given the difficult economic
environment, the partnership anticipates taking this approach and holding many
of the properties it forecloses upon for periods of time rather than immediately
selling the properties.





Part
I – Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Under the
reporting requirements of Smaller Reporting Companies, the partnership has
elected not to report on this item.





Part
I – Item 4.   CONTROLS AND PROCEDURES





As of
March 31, 2009, the partnership carried out an evaluation, under the supervision
and with the participation of the general partners of the effectiveness of the
design and operation of the partnership’s disclosure controls and procedures as
defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as
amended.  Based upon that evaluation, the general partners concluded
as of the end of the period covered by this report, that the partnership’s
disclosure controls and procedures are effective to ensure that information
required to be disclosed by the partnership in the reports that it files or
submits under that Act is recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commission’s rules and
forms, and is accumulated and communicated to the general partners as
appropriate to allow timely decisions regarding required
disclosure.





There was
no change in the partnership’s internal control over financial reporting during
the three months ended March 31, 2009 that has materially affected, or is
reasonably likely to materially affect, the partnership’s internal control over
financial reporting.


26


Part
II – OTHER INFORMATION








Item
1.                  Legal
Proceedings





From time
to time 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.








Item
1A.                  Risk
Factors





Not Applicable








Item
2.                  Unregistered
Sales of Equity Securities and Use of Proceeds





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





31.1
Certification of General Partner pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002


31.2
Certification of General Partner pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002


32.1
Certification of General Partner pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002


32.2
Certification of General Partner pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002





27


Signatures





Pursuant
to the requirements of the Securities Exchange Act of 1934 the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereto
duly authorized on the 15th day of May, 2009.





REDWOOD
      MORTGAGE INVESTORS VII,A
      CALIFORNIA LIMITED PARTNERSHIP








By:
                /S/
      Michael R. BurwellMichael
      R. Burwell, General PartnerBy:
                Gymno
      Corporation, General PartnerBy:
                /S/
      Michael R. BurwellMichael
      R. Burwell, President, Secretary/Treasurer & Chief Financial
      Officer








28





Exhibit
31.1


GENERAL
PARTNER CERTIFICATION





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





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





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





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





(b)
            designed
      such internal control over financial reporting, or caused such internal
      control over financial reporting to be designed under our supervision, to
      provide reasonable assurance regarding the reliability of financial
      reporting and the preparation of financial statements for external
      purposes in accordance with generally accepted accounting
      principles;





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





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





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





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





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

















/s/
Michael R. Burwell


_____________________________


Michael
R. Burwell, General Partner


May 15,
2009


29


Exhibit
31.2





PRESIDENT
AND CHIEF FINANCIAL OFFICER CERTIFICATION





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





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





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





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





(b)
            designed
      such internal control over financial reporting, or caused such internal
      control over financial reporting to be designed under our supervision, to
      provide reasonable assurance regarding the reliability of financial
      reporting and the preparation of financial statements for external
      purposes in accordance with generally accepted accounting
      principles;





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





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





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





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





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











/s/
Michael R. Burwell


_____________________________


Michael
R. Burwell, President, Secretary/Treasurer and


Chief
Financial Officer, of Gymno


Corporation,
General Partner


May 15,
2009


30


Exhibit
32.1





CERTIFICATION
PURSUANT TO


18 U.S.C.
SECTION 1350,


AS
ADOPTED PURSUANT TO


SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002








In
connection with the Quarterly Report of Redwood Mortgage Investors VII, a
California Limited Partnership (the “Partnership”) on Form 10-Q for the period
ended March 31, 2009 as filed with the Securities and Exchange Commission on the
date hereof (the “Report”), pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Michael R.
Burwell, certify, to the best of my knowledge:





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





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





A signed
original of this written statement required by Section 906 has been provided to
the Partnership and will be retained by the Partnership and furnished to the
Securities and Exchange Commission or its staff upon request.








/s/
Michael R. Burwell


_____________________________


Michael
R. Burwell, General Partner


May 15,
2009


31





Exhibit
32.2


CERTIFICATION
PURSUANT TO


18 U.S.C.
SECTION 1350


AS
ADOPTED PURSUANT TO


SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002





In
connection with the Quarterly Report of Redwood Mortgage Investors VII, a
California Limited Partnership (the “Partnership”) on Form 10-Q for the period
ended March 31 2009 as filed with the Securities and Exchange Commission on the
date hereof (the “Report”), pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Michael R.
Burwell, certify, to the best of my knowledge:





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





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





A signed
original of this written statement required by Section 906 has been provided to
the Partnership and will be retained by the Partnership and furnished to the
Securities and Exchange Commission or its staff upon request.














/s/
Michael R. Burwell


_____________________________


Michael
R. Burwell, President,


Secretary/Treasurer
& Chief Financial


Officer
of Gymno Corporation, General Partner


May 15,
2009






32