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

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

For Period Ended                                March 31, 2000
--------------------------------------------------------------------------------
Commission file number                             33-30427
--------------------------------------------------------------------------------

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

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

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

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

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

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the  Securities  Exchange Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant  was  required  to file  reports),  and (2) has been  subject to such
filing requirements for the past 90 days.

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

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS

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

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

                      APPLICABLE ONLY TO CORPORATE ISSUERS

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

                                 NOT APPLICABLE


<PAGE>

<TABLE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                                 BALANCE SHEETS
           MARCH 31, 2000 (unaudited) AND DECEMBER 31, 1999 (audited)

                                     ASSETS

                                                                                                   December 31,
                                                                             March 31, 2000            1999
                                                                               (unaudited)           (audited)
                                                                            ------------------    ----------------

<S>                                                                                  <C>                 <C>
Cash                                                                                 $204,497            $388,770
                                                                            ------------------    ----------------

Accounts receivable:
  Mortgage Investments, secured by deeds of trust                                  12,281,853          11,011,660
  Accrued Interest on Mortgage Investments                                            451,403             357,177
  Advances on Mortgage Investments                                                     29,101              31,669
  Accounts receivables, unsecured                                                     163,941             163,085
                                                                            ------------------    ----------------
                                                                                   12,926,298          11,563,591
  Less allowance for doubtful accounts                                                828,563             828,563
                                                                            ------------------    ----------------

                                                                                   12,097,735          10,735,028
                                                                            ------------------    ----------------

Real estate in process of acquisition, to be sold                                           0             525,510
Real estate owned, acquired through foreclosure, held for sale                        840,932             307,931
Prepaid expenses                                                                        2,816                   0
                                                                            ------------------    ----------------

                                                                                  $13,145,980         $11,957,239
                                                                            ==================    ================


                        LIABILITIES AND PARTNERS' CAPITAL

Liabilities:
  Notes payable - bank line of credit                                            $2,200,000           $800,000
  Accounts payable and accrued expenses                                              32,234             32,234
  Deferred Interest                                                                 115,709            115,709
                                                                             ---------------     --------------
                                                                                 $2,347,943            947,943
                                                                             ---------------     --------------

Partners' Capital

  Limited Partners' capital, subject to redemption (Note 4E):
     Net of Formation Loan receivable of $140,885 and $165,499 for
         2000 and 1999, respectively                                             10,786,059         10,997,318

  General Partners' capital,                                                         11,978             11,978
                                                                             ---------------     --------------

           Total Partners' Capital                                               10,798,037         11,009,296
                                                                             ---------------     --------------

           Total Liabilities and Partners' Capital                              $13,145,980        $11,957,239
                                                                             ===============     ==============




See accompanying notes to financial statements.
</TABLE>


<PAGE>

<TABLE>

                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                              STATEMENTS OF INCOME
    FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND MARCH 31, 1999 (unaudited)


                                                                       THREE MONTHS ENDED MARCH 31


                                                               ---------------------------------------------
<S>                                                                   <C>                        <C>
                                                                      2000                       1999
                                                               -------------------          ----------------
Revenues:
  Interest on Mortgage Investments                                       $305,263                  $416,849
  Interest on bank deposits                                                   697                       858
  Late charges                                                                318                       645
  Other                                                                     1,553                     2,001
                                                               -------------------          ----------------
                                                                          307,831                   420,353
                                                               -------------------          ----------------

Expenses:
  Mortgage servicing fees                                                  20,221                    31,563
  Interest on note payable - bank                                          27,123                    47,227
  Clerical costs through Redwood Mortgage                                   7,146                     7,967
  Asset management fee                                                      8,198                     3,827
  Provision for doubtful accounts and losses
       on real estate acquired through foreclosure                              0                    81,531
  Professional services                                                     8,452                    20,933
  Printing, supplies and postage                                            1,262                     3,464
  Other                                                                     1,863                     3,296
                                                               -------------------          ----------------
                                                                           74,265                   199,808
                                                               -------------------          ----------------


Net Income                                                               $233,566                  $220,545
                                                               ===================          ================

Net income:  To General Partners(1%)                                       $2,336                    $2,205
             To Limited Partners (99%)                                    231,230                   218,340
                                                               -------------------          ----------------
                                                                         $233,566                  $220,545
                                                               ===================          ================

Net income per $1,000 invested by Limited Partners for entire period:

     -where income is reinvested and  compounded                           $20.74                    $17.93
                                                               ===================          ================

     -where partner receives income in monthly distributions               $20.60                    $17.83
                                                               ===================          ================











See accompanying notes to financial statements.

</TABLE>

<PAGE>
<TABLE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                   STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
            FOR THE THREE YEARS ENDED DECEMBER 31, 1999 (audited) AND
                THE THREE MONTHS ENDED MARCH 31, 2000 (unaudited)

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

                        -----------------------------------------------------

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

                                             Capital
                                             Account-          Formation
                                             Limited              Loan
                                             Partners          Receivable             Total
                                          ---------------    ---------------     --------------
Balances at December 31, 1996                $14,002,529         $(429,163)        $13,573,366

Formation Loan collections                             0             60,223             60,223
Net income                                       818,610                  0            818,610
Early withdrawal penalties                      (40,258)             27,665           (12,593)
Partners' withdrawals                        (1,572,037)                  0        (1,572,037)
                                          ---------------    ---------------     --------------

Balances at December 31, 1997                $13,208,844         $(341,275)        $12,867,569

Formation Loan collections                             0             66,908             66,908
Net Income                                       838,105                  0            838,105
Early withdrawal penalties                      (30,529)             20,980            (9,549)
Partners' withdrawals                        (1,826,304)                  0        (1,826,304)
                                          ---------------    ---------------     --------------

Balances at December 31, 1998                $12,190,116         $(253,387)        $11,936,729

Formation Loan collections                             0             75,138             75,138
Net Income                                       900,485                  0            900,485
Early withdrawal penalties                      (18,553)             12,750            (5,803)
Partners' withdrawals                        (1,909,231)                  0        (1,909,231)
                                          ---------------    ---------------     --------------

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

Formation Loan collections                             0             21,972             21,972
Net Income                                       231,230                  0            231,230
Early withdrawal penalties                       (3,844)              2,642            (1,202)
Partners' withdrawals                          (463,259)                  0          (463,259)
                                          ---------------    ---------------     --------------

Balances at March 31, 2000                   $10,926,944         $(140,885)        $10,786,059
                                          ===============    ===============     ==============







See accompanying notes to financial statements

</TABLE>

<PAGE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                   STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
            FOR THE THREE YEARS ENDED DECEMBER 31, 1999 (audited) AND
                THE THREE MONTHS ENDED MARCH 31, 2000 (unaudited)

                                PARTNERS' CAPITAL
                 -------------------------------------------------
                                GENERAL PARTNER'S CAPITAL
                 -------------------------------------------------

                                        Capital Account
                                        General Partners       Total Partners'
                                                                   Capital
                                       ------------------    -------------------

Balances at December 31, 1996                    $11,978            $13,585,344

Formation Loan collections                             0                 60,223
Net income                                         8,269                826,879
Early withdrawal penalties                             0               (12,593)
Partners' withdrawals                            (8,269)            (1,580,306)
                                       ------------------    -------------------

Balances at December 31, 1997                    $11,978            $12,879,547

Formation Loan collections                             0                 66,908
Net income                                         8,466                846,571
Early withdrawal penalties                             0                (9,549)
Partners' withdrawals                            (8,466)            (1,834,770)
                                       ------------------    -------------------

Balances at December 31, 1998                    $11,978            $11,948,707

Formation Loan collections                             0                 75,138
Net income                                         9,096                909,581
Early withdrawal penalties                             0                (5,803)
Partners' withdrawals                            (9,096)            (1,918,327)
                                       ------------------    -------------------

Balances at December 31, 1999                    $11,978            $11,009,296

Formation Loan collections                             0                 21,972
Net income                                         2,336                233,566
Early withdrawal penalties                             0                (1,202)
Partners' withdrawals                            (2,336)              (465,595)
                                       ------------------    -------------------

Balances at March 31, 2000                       $11,978            $10,798,037
                                       ==================    ===================









See accompanying notes to financial statements



<PAGE>
<TABLE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                            STATEMENTS OF CASH FLOWS
         FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (unaudited)

                                                                                THREE MONTHS ENDED MARCH 31,

                                                                     ---------------------------------------------------

<S>                                                                         <C>                 <C>
                                                                            2000                1999
                                                                        --------------     ---------------
Cash flows from operating activities:

  Net income                                                                 $233,566            $220,545
  Adjustments to reconcile net income to net cash provided by
      operating activities:
    Provision for doubtful accounts                                                 0              81,531
    Provision for losses on real estate held for sale                               0                   0
    Early withdrawal penalty credited to income                               (1,202)             (1,401)
    (Increase) decrease in accrued interest & advances                       (91,658)             104,805
    Increase (decrease) in accounts payable and accrued expenses                    0               7,174
    Increase (decrease) in deferred interest on Mortgage Investments                0           (131,743)
    (Increase) decrease in prepaid expenses                                   (2,816)                   0
                                                                        --------------     ---------------

      Net cash provided by operating activities                               137,890             280,911
                                                                        --------------     ---------------

Cash flows from investing activities:

    Principal collected on mortgage investments                               130,227             942,300
    Mortgage Investments made                                             (1,400,420)         (2,478,115)
    Additions to Real Estate held for sale                                    (8,347)             (2,456)
    Dispositions of Real Estate held for sale                                       0              35,993
    Investment in Partnership                                                       0                   0
    Proceeds from unsecured Accounts Receivable                                     0                   0
                                                                        --------------     ---------------

      Net cash provided by (used in) investing activities                 (1,278,540)         (1,502,278)
                                                                        --------------     ---------------

Cash flows from financing activities:

  Net increase (decrease) in note payable-bank                              1,400,000           1,587,337
  Formation loan collections                                                   21,972              14,648
  Partners withdrawals                                                      (465,595)           (461,465)
                                                                        --------------     ---------------

      Net cash provided by (used in) financing activities                     956,377           1,140,520
                                                                        --------------     ---------------

Net increase (decrease) in cash                                             (184,273)            (80,847)

Cash - beginning of period                                                    388,770             461,544
                                                                        --------------     ---------------

Cash - end of period                                                         $204,497            $380,697
                                                                        ==============     ===============

See accompanying notes to financial statements.

</TABLE>

<PAGE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2000

NOTE 1 - ORGANIZATION AND GENERAL

Redwood  Mortgage  Investors VII, (the  "Partnership")  is a California  Limited
Partnership,  of which the General Partners are D. Russell  Burwell,  Michael R.
Burwell and Gymno  Corporation,  a California  corporation owned and operated by
the individual  General  Partners.  The  Partnership  was organized to engage in
business  as a  mortgage  lender  for the  primary  purpose  of making  Mortgage
Investments  secured  by  Deeds of Trust on  California  real  estate.  Mortgage
Investments  are being  arranged  and  serviced by Redwood  Mortgage  Corp.,  an
affiliate of the General Partners.  At September 30, 1992, the offering had been
closed with contributed capital totalling $11,998,359 for limited partners.

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

A. Sales Commissions - Formation Loan

Sales commissions ranging from 0% (Units sold by General Partners) to 10% of the
gross proceeds were paid by Redwood  Mortgage Corp., an affiliate of the General
Partners  that  arranges and services the Mortgage  Investments.  To finance the
sales  commissions,  the Partnership was authorized to loan to Redwood  Mortgage
Corp.  an amount  not to exceed  8.3% of the gross  proceeds  provided  that the
Formation  Loan  for the  minimum  offering  period  could  be 10% of the  gross
proceeds for that period.  The Formation  Loan is unsecured and is being repaid,
without  interest,  in ten  installments  of  principal,  over a ten year period
commencing  January 1, 1992. At December 31, 1992,  Redwood  Mortgage  Corp. had
borrowed  $914,369 from the Partnership to cover sales  commissions  relating to
$11,998,359  limited  partner  contributions  (7.62%).  Through  March 31, 2000,
$773,484  including  $139,515  in early  withdrawal  penalties,  had been repaid
leaving  a  balance  of  $140,885.  The  Formation  Loan,  which  is due from an
affiliate of the General  Partners',  has been deducted  from Limited  Partners'
capital in the balance  sheet.  As amounts are collected  from Redwood  Mortgage
Corp., the deduction from capital will be reduced.

B. Other Organizational and Offering Expenses

Organizational and offering expenses,  other than sales commissions,  (including
printing costs, attorney and accountant fees, and other costs), were paid by the
Partnership.  Such  costs  were  limited  to 10% of the  gross  proceeds  of the
offering or $500,000  whichever was less.  The General  Partners were to pay any
amount of such expenses in excess of 10% of the gross proceeds or $500,000.

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


<PAGE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2000

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Accrual Basis

Revenues and  expenses  are  accounted  for on the accrual  basis of  accounting
wherein  income is recognized as earned and expenses are recognized as incurred.
Once a Mortgage  Investment is  categorized  as impaired,  interest is no longer
accrued thereon.

B. Management Estimates

In preparing the financial statements,  management is required to make estimates
based on the  information  available that affect the reported  amounts of assets
and  liabilities  as of the balance sheet date and revenues and expenses for the
related periods.  Such estimates relate  principally to the determination of the
allowance for doubtful  accounts,  including the valuation of impaired  Mortgage
Investments,  and the  valuation of real estate  acquired  through  foreclosure.
Actual results could differ significantly from these estimates.

C. Mortgage Investments, Secured by Deeds of Trust

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

Financial  Accounting  Standards Board Statements  (SFAS) 114 and 118 (effective
January 1, 1995) provide that if the probable  ultimate recovery of the carrying
amount of a Mortgage  Investment,  with due  consideration for the fair value of
collateral, is less than the recorded investment, and related amount due and the
impairment is considered to be other than temporary,  the carrying amount of the
investment  (cost)  shall be reduced to the present  value of future cash flows.
The adoption of these statements did not have a material effect on the financial
statements  of the  Partnership  because that was  substantially  the  valuation
method previously used on impaired Mortgage Investments..

At March 31, 2000,  December 31, 1999 and December 31, 1998,  reductions  in the
cost of Mortgage Investments categorized as impaired by the Partnership totalled
$152,231, $152,231 and $38,634,  respectively. The reduction in stated value was
accomplished by increasing the allowance for doubtful accounts.

As presented in Note 10 to the financial  statements  as of March 31, 2000,  the
average mortgage investment to appraised value of security at the time the loans
were consummated was 62.35%. When a Mortgage Investment is valued for impairment
purposes, an updating is made in the valuation of collateral security.  However,
such a low loan to value ratio tends to minimize reductions for impairment.

D. Cash and Cash Equivalents

For purposes of the statements of cash flows, cash and cash equivalents  include
interest bearing and non-interest bearing bank deposits.

E. Real Estate Owned, Held for Sale

Real  estate  owned,  held for  sale,  includes  real  estate  acquired  through
foreclosure,  and is  stated  at the  lower of the  recorded  investment  in the
property,  net of any senior  indebtedness,  or at the property's estimated fair
value, less estimated costs to sell. At March 31, 2000, one additional  property
became Real  Estate  owned.  It was valued at fair value of $525,510  based on a
current appraisal. The $525,510 is net of a reduction in value of $230,040.


<PAGE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2000

The  following  schedule  reflects  the costs of real  estate  acquired  through
foreclosure and the recorded reductions to estimated fair values, less estimated
costs to sell as of March 31, 2000 and 1999,  including the aforementioned  real
estate owned:

                                          March 31,                  December 31
                                     ---------------            ----------------
                                            2000                        1999
                                     ---------------            ----------------

Costs of properties                       $1,189,612                  $1,182,701
Reduction in value                         (348,680)                   (349,260)
                                     ---------------           -----------------
Fair value reflected
  in financial statements                  $840,932                    $833,441
                                     ===============           =================

Effective  January 1, 1996, the Partnership  adopted the provisions of statement
No 121 (SFAS 121) of the Financial Accounting  Standards Board,  "Accounting for
the  Impairment  of Long Lived  Assets and for Long Lived  Assets to be disposed
of".  The  adoption  of  SFAS  121  did  not  have  a  material  impact  on  the
Partnership's  financial position because the methods indicated were essentially
those previously used by the Partnership.

F. Income Taxes

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

G. Organization and Syndication Costs

The Partnership  bears its own  organization  and syndication  costs (other than
certain  sales  commissions  and  fees  described  above)  including  legal  and
accounting expenses,  printing costs, selling expenses, a 1% wholesale brokerage
fee and filing fees.  Organizational  costs of $10,102 were capitalized and were
amortized  over a five year period.  Syndication  costs of $415,692 were charged
against partners' capital and were allocated to individual  partners  consistent
with the Partnership Agreement.

H. Allowance for Doubtful Accounts

Mortgage  Investments  and the related accrued  interest,  fees and advances are
analyzed on a continuous basis for recoverability.  Delinquencies are identified
and followed as part of the Mortgage  Investment system. A provision is made for
doubtful accounts to an amount considered by management to be adequate, with due
consideration  to  collateral  value,  to  provide  for  unrecoverable  accounts
receivable, including impaired Mortgage Investments, other Mortgage Investments,
accrued  interest  and  advances on  Mortgage  Investments,  and other  accounts
receivable  (unsecured).  The composition of the allowance for doubtful accounts
as of March 31, 2000 and December 31, 1999 was as follows:


<PAGE>



                             REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2000

                                             March 31                December 31
                                               2000                     1999
                                         ---------------        ----------------

Impaired mortgage investments                $152,231                  $152,231
Unspecified mortgage investments              598,803                   598,803
Accounts receivable, unsecured                 77,529                    77,529
                                         ---------------        ----------------
                                             $828,563                  $828,563
                                         ===============        ================

I. Net Income Per $1,000 Invested

Amounts  reflected in the statements of income as net income per $1,000 invested
by Limited  Partners  for the entire  period are  actual  amounts  allocated  to
Limited  Partners  who have  their  investment  throughout  the  period and have
elected to either  leave their  earnings to compound or have  elected to receive
monthly  distributions of their net income.  Individual income is allocated each
month  based on the  Limited  Partners'  pro rata  share of  Partners'  Capital.
Because the net income percentage varies from month to month, amounts per $1,000
will vary for those  individuals  who made or  withdrew  investments  during the
period,  or select other  options.  However,  the net income per $1,000  average
invested  has  approximated  those  reflected  for those whose  investments  and
options have remained constant.


<PAGE>



                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2000

NOTE 3 - GENERAL PARTNERS AND RELATED PARTIES

The  following  are  commissions  and/or  fees which will be paid to the General
Partners and/or related parties.

A. Mortgage Brokerage Commissions

Redwood Mortgage Corp.  receives mortgage brokerage  commissions for services in
connection with the review, selection, evaluation,  negotiation and extension of
Mortgage  Investments  in an  amount  up to 12% of the  principal  amount of the
Mortgage  Investments  through the period ending 6 months after the  termination
date of the offering.  Thereafter,  commissions  are limited to an amount not to
exceed 4% of the total Partnership assets per year. Such commissions are paid by
the borrowers, and are not an expense to the Partnership. Loan brokerage fees as
of March 31,  2000 and for the years  ended 1999,  and 1998,  totalled  $43,838,
$207,739 and $166,752, respectively.

B. Mortgage Servicing Fees

Redwood Mortgage Corp. also receives  monthly  mortgage  servicing fees of up to
1/8 of 1% (1.5%  annual) of the unpaid  principal,  or such lesser  amount as is
reasonable and customary in the geographic area where the property  securing the
Mortgage Investment is located. Mortgage servicing fees of $20,221, $127,440 and
$128,493  were  incurred for three months  through  March 31, 2000 and for years
ended 1999 and 1998, respectively.

C. Asset Management Fee

The  General  Partners  receive a monthly  fee for  managing  the  Partnership's
Mortgage  Investment  portfolio  and  operations of up to 1/32 of 1% of the "net
asset value" (3/8 of 1% annual).  Asset management fees were $8,198, $44,524 and
$16,141 for the three months through March 31, 2000 and for the years ended 1999
and 1998, respectively.

D. Other Fees

The Partnership Agreement provides for other fees such as reconveyance, Mortgage
assumption and Mortgage  extension fees. Such fees are incurred by the borrowers
and are paid to parties related to the General Partners.

E. Income and Losses

All income is credited  or charged to  partners in relation to their  respective
partnership  interests.   The  partnership  interest  of  the  General  Partners
(combined) is a total of 1%.


<PAGE>



                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2000

F. Operating Expenses

The General Partners or their affiliate  (Redwood Mortgage Corp.) are reimbursed
by the  Partnership  for all  operating  expenses  actually  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. Such
reimbursements are reflected as expenses in the Statements of Income.

G. General Partners Contributions

The General Partners  collectively or severally were to contribute 1/10 of 1% in
cash  contributions  as  proceeds  from the  offering  were  admitted to Limited
Partner capital.  As of December 31, 1992 a General Partner,  GYMNO Corporation,
had  contributed  $11,998,  1/10  of  1% of  Limited  Partner  contributions  in
accordance with Section 4.02(a) of the Partnership Agreement.

NOTE 4 - OTHER PARTNERSHIP PROVISIONS

A. Applicant Status

Subscription  funds  received from  purchasers of units were not admitted to the
Partnership until appropriate lending  opportunities were available.  During the
period  prior  to the  time of  admission,  which  ranged  between  1-120  days,
purchasers'  subscriptions  remained  irrevocable  and earned  interest at money
market  rates,  which were lower than the return on the  Partnership's  Mortgage
Investment portfolio.

Interest earned prior to admission was credited to partners in applicant status.
As Mortgage Investments were made,  applicant  subscriptions were transferred to
Limited  Partner  status to begin  sharing in income from  Mortgage  Investments
secured by deeds of trust.  The interest  earned  prior to admission  was either
paid to the  investors  or  transferred  to  Partners'  Capital  along  with the
original investment.

B. Term of the Partnership

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

C. Election to Receive Monthly, Quarterly or Annual Distributions

Upon  subscriptions,  investors elected either to receive monthly,  quarterly or
annual distributions of earnings  allocations,  or to allow earnings to compound
for at least a period of 5 years.

D. Profits and Losses

Profits and losses are allocated among the Limited  Partners  according to their
respective capital accounts after 1% is allocated to the General Partners.


<PAGE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2000

E. Liquidity, Capital Withdrawals and Early Withdrawals

There are substantial  restrictions on  transferability of Units and accordingly
an investment in the Partnership is not liquid. Limited Partners had no right to
withdraw from the  Partnership or to obtain the return of their capital  account
for at least one year from the date of purchase of Units which in all  instances
had  occurred  as of March 31,  2000.  In order to  provide a certain  degree of
liquidity to the Limited  Partners after the one-year  period,  Limited Partners
may withdraw all or part of their Capital  Accounts from the Partnership in four
quarterly  installments  beginning  on the  last  day of  the  calendar  quarter
following the quarter in which the notice of  withdrawal is given,  subject to a
10% early  withdrawal  penalty.  The 10%  penalty  is  applicable  to the amount
withdrawn early and will be deducted from the Capital Account.  Withdrawal after
the  one-year  holding  period  and  before  the  five-year  holding  period was
permitted only upon the terms set forth above.

After five years from the date of purchase of the Units.  Limited  Partners have
the right to withdraw from the Partnership,  on an installment basis,  generally
this is done over a five year period in twenty (20) quarterly installments. Once
a Limited  Partner has been in the Partnership for the minimum five year period,
no penalty  will be  imposed  if  withdrawal  is made in twenty  (20)  quarterly
installments  or longer.  Notwithstanding  the five-year (or longer)  withdrawal
period,  the General  Partners may liquidate all or part of a Limited  Partner's
capital account in four quarterly  installments beginning on the last day of the
calendar  quarter  following  the quarter in which the notice of  withdrawal  is
given. This withdrawal is subject to a 10% early withdrawal  penalty  applicable
to any sums withdrawn prior to the time when such sums could have been withdrawn
without penalty.

The Partnership will not establish a reserve from which to fund withdrawals and,
accordingly,  the  Partnership's  capacity to return a Limited Partner's capital
account is restricted to the availability of Partnership cash flow. Furthermore,
no more than 20% of the total Limited Partners' capital accounts  outstanding at
the beginning of any year, shall be liquidated during any calendar year.

F. Guaranteed Interest Rate For Offering Period

During the period  commencing with the day a Limited Partner was admitted to the
Partnership and ending 3 months after the offering termination date, the General
Partners  guaranteed  an interest  rate equal to the greater of actual  earnings
from mortgage  operations  or 2% above The Weighted  Average Cost of Funds Index
for  the  Eleventh  District  Savings  Institutions  (Savings  & Loan  &  Thrift
Institutions)  as  computed  by the  Federal  Home  Loan  Bank of San  Francisco
monthly, up to a maximum interest rate of 12%. The guarantee amounted to $12,855
and $5,195 in 1990 and 1991, respectively.  In 1992 and 1993, actual realization
exceeded the  guaranteed  amount each month.  Beginning  with fiscal years after
1993, the guarantee expired.

NOTE 5 - LEGAL PROCEEDINGS

Legal actions against  borrowers and other involved  parties have been initiated
by the Partnership to help assure payments against unsecured accounts receivable
totalling $163,941 at March 31, 2000. The Partnership is a defendant, along with
numerous  defendants  including a developer,  contractor and other lenders, in a
lawsuit involving the  Partnership's  attempt to recover it's investment in Real
Estate acquired through foreclosure.

Management  anticipates that the ultimate results of these cases will not have a
material  adverse  effect  on the  net  assets  of  the  Partnership,  with  due
consideration  having  been given in  arriving  at the  allowance  for  doubtful
accounts.


<PAGE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2000

NOTE 6 - NOTE PAYABLE BANK - LINE OF CREDIT

The  Partnership  has a bank line of credit  secured by its Mortgage  Investment
portfolio of up to $3,500,000 at .25% over prime. The balances outstanding as of
March 31, 2000 and December 31, 1999 were $2,200,000 and $800,000, respectively,
and the  interest  rate was  9.25%  (9.00%  prime + .25%).  This  line of credit
expires May 1, 2003.

NOTE 7 - INCOME TAXES

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

                                              March 31,            December 31,
                                                2000                   1999
                                           ---------------      ----------------

Net assets - Partners' Capital per
  financial statements                        $10,798,037            $11,009,296

Formation loan receivable                         140,885                165,499
Allowance for doubtful accounts                   828,563                828,563
                                           --------------        ---------------
Net assets tax basis                          $11,767,485            $12,003,358
                                           ==============        ===============

In 1999,  approximately  69% of  taxable  income  was  allocated  to tax  exempt
organizations i.e.,  retirement plans. Such plans do not have to file income tax
returns unless their  "unrelated  business  income" exceeds  $1,000.  Applicable
amounts become taxable when distribution is made to participants.

NOTE 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS

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

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

(b) The Carrying Value of Mortgage Investments - (see note 2 (c) is $12,281,853.
The March 31, 2000 fair value of these  investments  of $12,660,958 is 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 doubtful accounts along with accrued interest and advances related
thereto  should  also be  considered  in  evaluating  the fair value  versus the
carrying value.


<PAGE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH  31, 2000

NOTE 9 - ASSET CONCENTRATIONS AND CHARACTERISTICS

The Mortgage  Investments  are secured by recorded deeds of trust.  At March 31,
2000,  there  were  46  Mortgage  Investments  outstanding  with  the  following
characteristics:

Number of Mortgage Investments outstanding                                    46
Total Mortgage Investments outstanding                               $12,281,853

Average Mortgage Investment outstanding                                 $266,997
Average Mortgage Investment as percent of total                            2.17%
Average Mortgage Investment as percent of Partners' Capital                2.47%

Largest Mortgage Investment outstanding                               $1,500,000
Largest Mortgage Investment as percent of total                           12.21%
Largest Mortgage Investment as percent of Partners' Capital               13.89%

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

Largest percentage of Mortgage Investments in one county                  24.40%
Average Mortgage Investment to appraised value of security
     at time loan was consummated                                         62.35%

Number of Mortgage Investments in foreclosure                                  0


The following categories of Mortgage Investments are pertinent at March 31, 2000
and December 31, 1999:

                                            March 31,               December 31,
                                     ------------------         ----------------
                                              2000                      1999
                                     ------------------         ----------------

First Trust Deeds                            $6,679,301               $6,077,532
Second Trust Deeds                            4,953,334                4,272,714
Third Trust Deeds                               649,218                  661,414
                                     ------------------         ----------------
  Total Mortgage Investments                 12,281,853               11,011,660
Prior liens due other lenders                13,961,898               10,389,233
                                     ------------------         ----------------
  Total debt                                $26,243,751              $21,400,893
                                     ==================         ================

Appraised property value at
   time of loan                             $42,087,820              $34,223,193
                                     ==================         ================

Total investments as a percent
   of appraisals                                 62.35%                   62.53%
                                     ==================         ================

Investments by Type of Property

Owner occupied homes                           $391,804                 $340,864
Non-Owner occupied homes                      2,765,747                2,347,394
Apartments                                      182,674                  182,675
Commercial                                    8,941,628                8,140,727
                                     ------------------         ----------------
                                            $12,281,853              $11,011,660
                                     ==================         ================



<PAGE>



                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                MARCH 31, 2000

Scheduled  maturity  dates of mortgage  investments  as of March 31, 2000 are as
follows:

                    Year Ending
                   December 31,

                --------------------

                       2000                                         $4,347,437
                       2001                                          6,044,352
                       2002                                            893,704
                       2003                                             63,916
                       2004                                            145,882
                    Thereafter                                         786,562
                                                             ------------------
                                                                   $12,281,853

                                                             ==================

The  scheduled  maturities  for 2000  include  approximately  $2,383,468  in ten
Mortgage  Investments  which  are past  maturity  at March  31,  2000.  Interest
payments  on most of  these  loans  are  current.  $814,947  of  these  Mortgage
Investments were categorized as delinquent over 90 days.

Six mortgage  investments  with  principal  outstanding of $964,224 had interest
payments  overdue in excess of 90 days. Six Mortgage  Investments with principal
outstanding of $1,099,474  were  considered  impaired at March 31, 2000. That is
interest accruals are no longer recorded thereon.

The cash  balance  at March 31,  2000 of  $204,497  was in three  banks  with an
interest  bearing  balances  totalling  $103,669.  The  balances  exceeded  FDIC
insurance  limits (up to $100,000 per bank) by $4,345.  The  Partnership's  main
bank is the same financial  institution  that has provided the Partnership  with
the $3,500,000  limit line of credit.  At March 31, 2000, draw down against this
facility was $2,200,000. As and when deposits in the Partnership's bank accounts
increase  significantly beyond the insured limit, the funds are either placed in
new Mortgage Investments or used to pay-down on the line of credit balance.


<PAGE>


            MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

On  September  30,  1992,  the  Partnership  had sold  119,983.59  units and its
contributed  capital totaled  $11,998,359 of the approved  $12,000,000 issue, in
units of $100 each. As of that date, the offering was formally closed.  At March
31, 2000, Partners' Capital totaled $10,798,037.

At March 31, 2000, the Partnership  Mortgage  Investments  outstanding  totalled
$12,281,853.  This  represents a decline of $927,333  from the December 31, 1998
Mortgage Investments balance. This reduction in Mortgage Investments outstanding
as of March 31, 2000 was chiefly due to cash proceeds  from Mortgage  Investment
repayments being used to fund withdrawals to the Limited Partners of $2,394,887,
during 1999,  and three  months  through  March 31, 2000.  This was offset by an
increase in Note Payable-Bank of $287,337, reinvestment of earnings of $523,881,
reduction in accrued  interest,  other  receivables and investment of cash. To a
certain extent,  the reduction was also due to significant loan pay-offs towards
the latter part of 1999.  Mortgage  investments  decreased from $13,449,741 from
1997 to $13,209,186  in 1998, a decrease of $240,555  chiefly due to the ability
of the General  Partners to reduce  amounts of real  estate  owned by  $289,743,
convert it's partnership interest to cash of $346,017,  reinvestment of earnings
of $390,213,  offset by payments to withdrawing Limited Partners  $1,856,833,  a
reduction of  outstanding  Note Payable - Bank of $1,112,663  and  investment of
cash. The Partnership  began funding Mortgage  Investments on December 27, 1989,
and as of March 31, 2000,  had credited the Partners  accounts with income at an
average annualized (compounded) yield of 7.78%.

Since the Fall of 1999,  mortgage  interest rates have been rising due primarily
to economic  forces and by the Federal  Reserve raising its core interest rates.
New Mortgage Investments will be originated at higher interest rates which could
increase the average return across the entire Mortgage Investment portfolio held
by the Partnership.  In the future, interest rates likely will change from their
current levels.  The General Partners cannot at this time predict at what levels
interest  rates  will  be in the  future.  Although  the  rates  charged  by the
Partnership  are  influenced by the level of interest  rates in the market,  the
General  Partners do not anticipate that rates charged by the Partnership to its
borrowers will change  significantly from the beginning of 2000 over the next 12
months.  As of March 31, 2000 the Partnership  Real Estate Owned account and the
investment  in  Partnership  account had a combined  balance of $840,932.  These
accounts  had  combined  balances of $397,396  and  $307,931 for the years ended
December 31, 1998 and 1999,  respectively.  The General Partners anticipate that
the  annualized  yield for the coming new year,  2000,  will be higher  than the
previous year.

The  Partnership  has a line of credit  with a  commercial  bank  secured by its
Mortgage  Investments to a limit of $3,500,000,  at a variable interest rate set
at one quarter percent above the prime rate. As of March 31, 2000,  December 31,
1999  and  December  31,  1998,  the  balances  were  $2,200,000,  $800,000  and
$1,912,663,  respectively.  This line of credit  expires on May 01,  2003.  This
added source of funds helped in maximizing the Partnership yield by allowing the
Partnership to minimize the amount of funds in lower yield  investment  accounts
when appropriate Mortgage Investments are not currently available. Since most of
the Mortgage  Investments  made by the  Partnership  bear  interest at a rate in
excess of the rate payable to the bank which  extended the line of credit,  once
the required  principal and interest  payments on the line of credit are paid to
the bank,  the Mortgage  Investments  funded  using the line of credit  generate
revenue for the  Partnership.  As of March 31, 2000, the  Partnership is current
with its interest  payments on the line of credit.  For the years ended December
31, 1998,  1999 and three months period ended March 31, 2000,  interest paid was
$170,867,  $182,350 and $27,123,  respectively,  reflecting  an overall  average
utilization of the credit line of approximately $2,200,000.

The Partnership's income and expenses, accruals and delinquencies are within the
normal range of the General Partners' expectations,  based upon their experience
in managing similar  Partnerships  over the last  twenty-three  years.  Mortgage
Servicing Fees increased in 1998 to $128,493, in 1999 to $127,440 and to $20,221
during three months  through March 31, 2000,  chiefly due to an increase  during
the 1998 year of the  monthly  loan  service  fee to 1/12% (1% per year).  Asset
Management  Fees  increased to $16,141 in 1998,  and to $44,524 in 1999. For the
three months through March 31, 2000,  Management Fees paid was $8,198.  In 1997,
the General  Partners waived or partially waived this fee to the Partnership and
increased the Asset  Management  Fee to its allowed  amount of 3/8 of 1% in 1999
and 2000.  All other  expenses  fluctuated  in a very  close  range  except  for
Interest on Note Payable - bank and Provision  for Doubtful  Accounts and losses
on Real Estate acquired through foreclosure each discussed


<PAGE>



elsewhere in this Management  Discussion and Analysis of Financial Condition and
Results of  Operations.  Borrower  foreclosures,  as set forth under  Results of
Operations,  are a normal  aspect  of  Partnership  operations  and the  General
Partners  anticipate that they will not have a material effect on liquidity.  As
of March 31, 2000,  there were no properties in foreclosure.  Cash is constantly
being generated from interest  earnings,  late charges,  pre-payment  penalties,
amortization of Mortgage Investments and pay-off on notes. Currently,  cash flow
exceeds Partnership expenses,  earnings and capital payout requirements.  Excess
cash  flow  will be  invested  in new  Mortgage  Investment  opportunities  when
available,  used to reduce  the  Partnership  credit  line or other  Partnership
business.

The  General  Partners  regularly  review  the  Mortgage  Investment  portfolio,
examining the status of delinquencies,  the underlying collateral securing these
properties,  the REO expenses and sales  activities,  borrowers payment records,
etc.  Data on the local real estate market and on the national and local economy
are  studied.  Based upon this  information  and other data,  loss  reserves are
increased  or  decreased.  Because  of the  number of  variables  involved,  the
magnitude of the possible swings and the General  Partners  inability to control
many of these factors,  actual results may and do sometimes differ significantly
from  estimates  made by the General  Partners.  Management  provided  $434,495,
$423,054,  $329,057  and $0 for the first  quarter  of 2000,  as  provision  for
doubtful  accounts  for the  years  ended  December  31,  1997,  1998 and  1999,
respectively.  The  provision  for doubtful  accounts was  decreased  $11,441 to
$423,054  in 1998 and by $93,997 to $329,057 in 1999.  These  decreases  reflect
reduced expected REO anticipated losses and improved  collections of secured and
unsecured receivables.

The  February  18,  2000  issue of the  "Alert"  publication,  published  by the
California Chamber of Commerce,  said the following about California's  thriving
economy:

"Job  gains  grew in the  fourth  quarter  of 1999,  as the  California  economy
accelerated.  For  the  year  as  a  whole,  employment  grew  by  2.9  percent,
considerably  stronger  than in the  nation.  This gain  likely  will be revised
upward to 3.3 percent,  or so, in the benchmark revisions to be released in late
February.

State  unemployment,  at 4.9 percent in the last four  months,  is lower than in
more than 30 years. Tax revenues are flooding into  Sacramento,  in part because
of the strong  economy,  but also because of  exercised  stock  options,  strong
bonuses and huge realized stock market gains.

The state economy's  strength has been widespread across major  industries,  but
concern about residential real estate is growing.

Housing permits were issued at an annual rate of 139,000 units through  November
1999, well below almost  everyone's  expectations and the 220,000 units averaged
annually in the 1980s. Clearly, not enough housing is being built in the state.

High land prices,  restrictive local land use policies,  the re-emergence of the
slow  growth/no  growth  movement,  and federal  environmental  regulations  are
constraining  home  building.  As a result,  affordability  is  declining  at an
alarming rate.

The  affordability of existing homes is low in San Diego and Orange counties and
extremely  low almost  everywhere  in the San  Francisco Bay Area. In what seems
like a paradox,  an oversupply of expensive new homes is  developing.  This also
happened under similar circumstances in the late 1980s.

In areas of particularly high land prices and long permitting and other building
delays,  building entry and mid-level  housing becomes more difficult to "pencil
out".  As  developers  turn  increasingly  to expensive  housing,  the supply of
expensive  housing can quickly outstrip demand.  Also, the  affordability of new
homes can dip considerably below that of existing homes.


<PAGE>



In Orange County,  for example,  a relatively low 32 percent of households could
afford to buy the median-priced existing home sold in November;  only 19 percent
could afford to buy the median-priced new home."

To the  Partnership,  the above  evaluation of the  California  economy means an
increase in property values, job growth, personal income growth, etc., which all
translates  into  more  loan  activity,  which of  course,  is  healthy  for the
Partnership's lending activity.

The  Partnership's  interest in land located in East Palo Alto, Ca, was acquired
through foreclosure.  The investment was previously  classified as Investment in
Partnership  in the Financial  Statements  and has been  reclassified  into Real
Estate Owned. The Partnership's basis of $18,523, $9,039, and $ 0, for the three
months period ended March 31, 2000 and for the years ended December 31, 1999 and
1998, respectively,  has been invested with that of two other Partnerships.  The
Partnership is continuing to explore  remediation  options available to mitigate
the  pesticide  contamination,   which  affects  the  property.  This  pesticide
contamination  appears  to be the  result of  agricultural  operations  by prior
owners, and is unrelated to the Arsenic Contamination for which a major chemical
company remains  responsible.  The General  Partners do not believe at this time
that  remediation  of the pesticide  contaminants  will have a material  adverse
effect on the financial  condition of the Partnership.  The General Partners are
attempting to subdivide  this land into two parcels and exploring the ability to
obtain new zoning for this property.

At the  time  of  subscription  to the  Partnership,  Limited  Partners  made an
irrevocable decision to either take distributions of earnings monthly, quarterly
or annually or to compound  earnings  in their  capital  account.  For the years
ended  December 31,  1998,  1999 and three months  through  March 31, 2000,  the
Partnership made  distributions of earnings to Limited Partners after allocation
of  syndication  costs  of  $456,358,   $490,841  and  $116,993,   respectively.
Distribution  of Earnings to Limited  Partners  after  allocation of syndication
costs for the years ended December 31, 1998, 1999 and three months through March
31, 2000 to Limited  Partners'  capital accounts and not withdrawn was $381,747,
$409,644 and $114,237,  respectively.  As of December 31 1998, December 31, 1999
and March 31, 2000,  Limited Partners electing to withdraw earnings  represented
53%, 54% and 52% of the Limited Partners capital.

The  Partnership  also allows the Limited  Partners  to withdraw  their  capital
account  subject  to  certain   limitations  (see   liquidation   provisions  of
Partnership Agreement).  For the years ended December 31, 1998, 1999 and for the
three months  through  March 31,  2000,  $381,458,  $231,025  and $48,056,  were
liquidated  subject to the 10% penalty for early  withdrawal.  These withdrawals
are within the normally anticipated range that the General Partners would expect
in their experience in this and other partnerships.  The General Partners expect
that a small  percentage  of  Limited  Partners  will elect to  liquidate  their
capital  accounts  over  one  year  with  a 10%  early  withdrawal  penalty.  In
originally  conceiving the  Partnership,  the General Partners wanted to provide
Limited   Partners  needing  their  capital  returned  a  degree  of  liquidity.
Generally, Limited Partners electing to withdraw over one year need to liquidate
their  investment to raise cash. The trend the  Partnership is  experiencing  in
withdrawals  by  Limited  Partners  electing  a  one  year  liquidation  program
represents  a small  percentage  of Limited  Partner  capital as of December 31,
1998, December 31, 1999 and March 31, 2000,  respectively and is expected by the
General Partners to commonly occur at these levels.

Additionally, for the years ended December 31, 1998, December 31, 1999 and three
months   through   March  31,  2000,   $1,019,017,   $1,205,917   and  $302,054,
respectively, were liquidated by Limited Partners who have elected a liquidation
program over a period of five years or longer.  This  ability to withdraw  after
five  years by Limited  Partners  has the effect of  providing  Limited  Partner
liquidity  which the  General  Partners  then  expect a portion  of the  Limited
Partners  to  avail  themselves  of.  This  has the  anticipated  effect  of the
Partnership  growing,  primarily  through  reinvestment of earnings in years one
through five. The General  Partners expect to see increasing  numbers of Limited
Partner  withdrawals  in years five  through  eleven,  at which time the bulk of
those Limited Partners who have sought  withdrawal have been  liquidated.  After
year eleven,  liquidation  generally subsides and the Partnership  capital again
tends to increase.
<PAGE>
<TABLE>

Actual  liquidation  of both capital and earnings from year five (1994)  through
year ten (1999) and three months ended March 31, 2000, is shown hereunder:

                                            Years ended December 31,

<S>                          <C>                  <C>                   <C>                      <C>
                             1994                 1995                  1996                     1997
                   ---------------       --------------        --------------         ----------------

Earnings                 $263,206             $270,760              $336,341                 $399,379
Capital                 *$340,011            *$184,157             *$722,536              *$1,212,916
                   ---------------       --------------        --------------         ----------------
Total                    $603,217             $454,917            $1,058,877               $1,612,295
                   ===============       ==============        ==============         ================

                                                                     For the three months
                             1998                 1999             through March 31, 2000
                   ---------------       --------------        ---------------------------
Earnings                 $456,358             $490,841                   $116,993
Capital               *$1,400,475          *$1,436,942                  *$350,110
                   ---------------       --------------               ------------
Total                  $1,856,833           $1,927,783                   $467,103
                   ===============       ==============               ============

* These amounts represent gross of early withdrawal penalties.

         The Year 2000 was  considered  by most to be a challenge for the entire
world with respect to the conversion of existing  computerized  operations.  The
Partnership relies on Redwood Mortgage Corp., third parties and various software
vendors for its hardware and software  needs.  Since year 2000 has come, we have
not experienced any computer hardware breakdowns. We assume that our testing and
upgrading of computer  hardware prior to year 2000 identified all hardware areas
of concern.  Computer  software  programs  are all  operational  with only minor
problems  being  experienced  with  some  programs.  These  problems  are  being
addressed  by the  appropriate  software  vendors or software  programmers.  All
quarterly  and  annual  computerized  functions  have not yet been run,  however
testing of the  operations  has taken  place.  We do not expect any  significant
problems.

         The costs of updating our computer systems were substantially  borne by
the non affiliated  software vendors and the in house system conversion costs to
the Partnership were marginal.

         Year 2000  issues do not appear to have  affected,  in any  significant
manner, any industries or businesses in the marketplace in which the Partnership
places its loans. We believe that year 2000 issues are a non-event and will have
little if any future effect on the Partnership, its affiliates or the people and
businesses with which it associates.

         The  foregoing  analysis of year 2000 issues  includes  forward-looking
statements  and  predictions  about  possible  or  future  events,   results  of
operations,  and  financial  condition.  As such,  this analysis may prove to be
inaccurate  because of  assumptions  made by the General  Partners or the actual
development  of  future  events.  No  assurance  can be given  that any of these
statements or predictions  will ultimately  prove to be correct or substantially
correct.
</TABLE>

<PAGE>


COMPENSATION OF THE GENERAL PARTNERS AND AFFILIATES BY PARTNERSHIP

As indicated above in Item 10, the Partnership has no officers or directors. The
Partnership is managed by the General Partners. There are certain fees and other
items paid to management and related parties.

A  more  complete  description  of  management  compensation  is  found  in  the
Prospectus, pages 12-13, under the section "Compensation of the General partners
and the Affiliates",  which is incorporated by reference.  Such  compensation is
summarized below.

The following  compensation has been paid to the General Partners and Affiliates
for services  rendered  during the three  months ended March 31, 2000.  All such
compensation  is in compliance  with the guidelines and limitations set forth in
the Prospectus.

Entity Receiving

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

I.  Redwood Mortgage        Mortgage Servicing Fee for servicing
    Corp.                   Mortgage Investments                         $20,221

General Partners            Asset Management Fee for
&/or Affiliates             managing assets.............................  $8,198

General Partners            1% interest in profits......................  $2,336

General Partners &/or       Portion  of  early  withdrawal   penalties
Affiliates                  applied to reduce Formation Loan............  $2,642

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

Redwood Mortgage Corp.      Mortgage Brokerage Commissions for services in
                            connection with the review, selection, evaluation,
                            negotiation, and extension of the Mortgage
                            Investments paid by the borrowers and not by
                            the Partnership ...........................  $43,838

Redwood Mortgage Corp.      Processing and Escrow Fees for services in
                            connection with notary, document preparation,
                            credit investigation, and escrow fees payable
                            by the borrowers and not by the Partnership...$1,949

Gymno Corporation Inc.      Reconveyance Fee..............................   $74




     III. IN ADDITION, THE GENERAL PARTNERS AND/OR RELATED COMPANIES PAY CERTAIN
EXPENSES ON BEHALF OF THE PARTNERSHIP FOR WHICH IT IS REIMBURSED AS NOTED IN THE
STATEMENT OF INCOME.                                                      $7,146




<PAGE>


           MORTGAGE INVESTMENT PORTFOLIO SUMMARY AS OF MARCH 31, 2000

                             Partnership Highlights

Mortgage Investment to Value Ratios

First Trust Deeds                                                $6,679,300.60
Appraised Value of Properties *                                  10,745,559.00
   Total Investment as a % of Appraised Value                           62.16%

First Trust Deed Mortgage Investments                             6,679,300.60
Second Trust Deed Mortgage Investments                            4,953,334.08
Third Trust Deed Mortgage Investments                               649,218.59
                                                             ------------------
                                                                $12,281,853.27

First Trust Deeds due other Lenders                              12,193,339.00
Second Trust Deeds due other Lenders                              1,768,559.00
                                                             ------------------

Total Debt                                                      $26,243,751.27

   Appraised Property Value *                                    42,087,820.00
   Total Investment as a % of Appraised Value                           62.35%

Number of Mortgage Investments Outstanding                                  46

Average Investment                                                 $266,996.81
Average Investment as a % of Net Assets                                  2.47%
Largest Investment Outstanding                                    1,500,000.00
Largest Investment as a % of Net Assets                                 13.89%

Loans as a Percentage of Total Mortgage Investments

First Trust Deed Mortgage Investments                                   54.38%
Second Trust Deed Mortgage Investments                                  40.33%
Third Trust Deed Mortgage Investments                                    5.29%
                                                              -----------------
Total                                                                  100.00%

Mortgage Investments by Type of

Property                                 Amount                   Percent

Owner Occupied Homes                     $391,803.68                     3.19%
Non Owner Occupied Homes                2,765,746.98                    22.52%
Apartments                                182,674.45                     1.49%
Commercial                              8,941,628.16                    72.80%
                                                              -----------------
                                    -----------------
Total                                 $12,281,853.27                   100.00%

Statement of Conditions of Mortgage Investments

         Number of Mortgage Investments in Foreclosure                 0

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


<PAGE>




Diversification by County

County                                          Total Loans          Percent

Stanislaus                                    $2,996,554.16           24.40%
San Mateo                                      2,869,677.71           23.37%
San Francisco                                  2,048,597.89           16.68%
Contra Costa                                   1,458,122.20           11.87%
Alameda                                          869,643.91            7.08%
Santa Clara                                      583,019.76            4.75%
Placer                                           573,627.54            4.67%
Santa Cruz                                       521,247.78            4.24%
Sonoma                                           158,605.39            1.29%
Sacramento                                        96,716.11            0.79%
Shasta                                            80,040.82            0.65%
Ventura                                           26,000.00            0.21%
                                         -------------------      -----------

Total                                        $12,281,853.27          100.00%







<PAGE>





                                     PART 2

                                OTHER INFORMATION

         Item 1.           Legal Proceedings

                                    None,  where the Partnership is a defendant.
                                    Please refer to Note 6 of Notes to Financial
                                    Statements.

         Item 2.           Changes in the Securities

                                    Not Applicable

         Item 3.           Defaults upon Senior Securities

                                    Not Applicable

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

                                    Not Applicable

         Item 5.           Other Information

                                    Not Applicable

         Item 6.           Exhibits and Reports on Form 8-K

                           (a)      Exhibits

                                    Not Applicable

                           (b)      Form 8-K

                                    The registrant  has not filed any reports on
                                     Form 8-K  during  the  three  month  period
                                     ending March 31, 2000


<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities  Exchange
Act of 1934 the  registrant  has duly  caused  this  report  to be signed on its
behalf by the undersigned, thereto duly authorized on the 12th day of May, 2000.

REDWOOD MORTGAGE INVESTORS VII

By:       /S/ D. Russell Burwell
          ---------------------------------------------
          D. Russell Burwell, General Partner

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

By:       Gymno Corporation, General Partner

          By:     /S/ D. Russell Burwell

                  ---------------------------------------------
                  D. Russell Burwell, President

          By:     /S/ Michael R. Burwell

                  ---------------------------------------------
                  Michael R. Burwell, Secretary/Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following person on behalf of the registrant and in
the capacity indicated on the 12th day of May, 2000.

Signature                                 Title                         Date

/S/ D. Russell Burwell

-----------------------------------
D. Russell Burwell                   General Partner                May 12, 2000


/S/ Michael R. Burwell

-----------------------------------
Michael R. Burwell                   General Partner                May 12, 2000



/S/ D. Russell Burwell

-----------------------------------
D. Russell Burwell         President of Gymno Corporation,          May 12, 2000
                           (Principal Executive Officer);
                           Director of Gymno Corporation


/S/ Michael R. Burwell

-----------------------------------
Michael R. Burwell       Secretary/Treasurer of Gymno               May 12, 2000
                         Corporation (Principal Financial
                                and Accounting Officer);
                         Director of Gymno Corporation