PRE 14A: Preliminary proxy statement not related to a contested matter or merger/acquisition

Dynex Capital, Inc.




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Notice of Annual Meeting of Stockholders
and
Proxy Statement


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Annual Meeting of Stockholders
May 19, 1998



DYNEX CAPITAL, INC.




March 26, 1998






To Our Stockholders:

You are cordially invited to attend the 1998 Annual Meeting of
Stockholders of Dynex Capital, Inc. to be held at the AmeriSuites Hotel
located at Innsbrook Corporate Center, 4100 Cox Road, Glen Allen, Virginia on
Tuesday, May 19, 1998, at 2:00 p.m. Eastern time.

The business of the meeting is to (i) elect the Directors and (ii)
approved an amendment to the Company's Articles of Incorporation. Information
relating to these proposals is set forth in the Proxy Statement attached.

While stockholders may exercise their right to vote their shares
in person, we recognize that many stockholders may not be able to attend the
Annual Meeting. Accordingly, we have enclosed a proxy which will enable you
to vote your shares on the issues to be considered at the Annual Meeting even
if you are unable to attend. All you need to do is mark the proxy to indicate
your vote, date and sign the proxy, and return it in the enclosed postage-paid
envelope as soon as conveniently possible. If you desire to vote in
accordance with management's recommendations, you need not mark your votes on
the proxy but need only sign, date and return the proxy in the enclosed
postage-paid envelope in order to record your vote.

Sincerely,



Thomas H. Potts
President




1
DYNEX CAPITAL, INC.

10900 Nuckols Road
Glen Allen, Virginia 23060
(804) 217-5800
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS



To Our Stockholders:

The Annual Meeting of Dynex Capital, Inc. will be held at the
AmeriSuites Hotel located at Innsbrook Corporate Center, 4100 Cox Road, Glen
Allen, Virginia on Tuesday, May 19, 1998, at 2:00 p.m. Eastern time, to
consider and act upon the following matters:
1. The election of five Directors, each for a one-year term;
2. Approval of an amendment to the Company's Articles of Incorporation
to comply with certain requirements of the New York Stock
Exchange ("NYSE") regarding transactions entered into or through
facilities of the NYSE which involve excess shares of the Company's
common stock; and
3. Such other business as may properly come before the Annual Meeting.

Only stockholders of record at the close of business on March 25, 1998,
the record date, will be entitled to vote at the Annual Meeting.

Management desires to have maximum representation at the Annual
Meeting and respectfully requests that you date, execute and promptly mail the
enclosed proxy in the accompanying postage-paid envelope. A proxy may be
revoked by a stockholder by notice in writing to the Secretary of the
Company at any time prior to its use, by presentation of a later-dated
proxy, or by attending the Annual Meeting and voting in person.

By order of the Board of Directors



Lynn K. Geurin
Secretary




Dated: March 26, 1998



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[GRAPHIC OMITTED]

Directions from the North on Interstate 95:
Take the Interstate 295 West-Charlottesville exit. Travel approximately
8.5 miles on Interstate 295 West towards Charlottesville. Take the
Nuckols Road-South Exit. Travel approximately 1.0 mile to the first stop light,
which is located at the corner of Cox and Nuckols Road. Turn right on Cox
Road. Travel approximately 1.5 miles and turn right at the AmeriSuites Hotel
entrance.

Directions from the airport:
(In regards to the map above - Interstate 64 should be used as a reference
point only)As you leave the airport on 156 North-Airport Drive follow the "to
295-North"signs. You will pass the Interstate 64 East and West exists and the
Interstate295 South exit. After these exits, continue on 156
North-Airport Drive approximately 2.5 miles. Take the "295 North to 95-North
and 64-West" exit Northtowards Washington. Stay on Interstate 295 North for
approximately 19.5 miles.Take the Nuckols Road-South Exit. Travel
approximately 1.0 mile to the firststop light, which is located at the corner
of Cox and Nuckols Road. Turn righton Cox Road. Travel approximately 1.5
miles and turn right at the AmeriSuites Hotel entrance.

Directions from the South or Downtown:
Take Interstate 64 West to Interstate 295 towards Washington. Take the
first exit - Nuckols Road South. Travel approximately 1.0 mile to the
first stop light, which is located at the corner of Cox and Nuckols Road. Turn
right on Cox Road. Travel approximately 1.5 miles and turn right at the
AmeriSuites Hotel entrance.




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1
DYNEX CAPITAL, INC.

10900 Nuckols Road
Glen Allen, Virginia 23060
(804) 217-5800
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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
May 19, 1998

To Our Stockholders:

This Proxy Statement is furnished with the solicitation by the Board
of Directors of Dynex Capital, Inc. (the "Company") of proxies to be used at
the Annual Meeting of Stockholders of the Company to be held at the
AmeriSuites Hotel located at Innsbrook Corporate Center, 4100 Cox Road, Glen
Allen, Virginia on Tuesday, May 19, 1998, at 2:00 p.m. Eastern time. The Annual
Meeting is being held for the purposes set forth in the accompanying notice of
Annual Meeting of Stockholders. This Proxy Statement, the accompanying proxy
card and the notice of Annual Meeting are being provided to stockholders
beginning on or about March 26, 1998.

GENERAL INFORMATION

Solicitation

The enclosed proxy is solicited by the Board of Directors of the Company.
The costs of this solicitation will be borne by the Company. Proxy
solicitations will be made by mail, and also may be made by personal interview,
telephone and telegram by Directors and officers of the Company. Brokerage
houses and nominees will be requested to forward the proxy soliciting
material to the beneficial owners of the Company's common stock and to
obtain authorization for the execution of proxies. The Company will, upon
request, reimburse such parties for their reasonable expenses in forwarding
proxy materials to such beneficial owners. Additionally, the Company has
engaged the firm of MacKenzie Partners, Inc., New York, New York, to conduct
proxy solicitations on its behalf at a cost estimated to be $5,000, plus
reasonable out-of-pocket expenses.

Voting Rights

Holders of shares of the Company's common stock at the close of
business on March 25, 1998, the record date, are entitled to notice of, and
to vote at,the Annual Meeting. On that date 45,548,182 shares of common
stock were outstanding. Each share of common stock outstanding on the
record date is entitled to one vote on each matter presented at the
Annual Meeting. The presence, in person or by proxy, of stockholders
entitled to cast a majority of all the votes entitled to be cast constitutes
a quorum for the transaction of business at the Annual Meeting.

Voting of Proxies

Shares of common stock represented by all properly executed
proxies received in time for the Annual Meeting will be voted in accordance
with the choices specified in the proxy. Unless contrary instructions are
indicated on the proxy, the shares will be voted FOR the election of the
nominees named in this Proxy Statement as Directors, and FOR the amendment
to the Company's Articles of Incorporation to comply with certain
requirements of the New York Stock Exchange relating to transactions involving
excess shares, as set forth herein.

The management and the Board of Directors of the Company know of
no matters to be brought before the Annual Meeting other than as set forth
herein; no stockholder proposals were received by the Company on or before
November 1,1997, the deadline for inclusion of such proposals in this Proxy
Statement.



Revocability of Proxy

The giving of the enclosed proxy does not preclude the right to vote
in person should the stockholder giving the proxy so desire. A proxy may be
revoked at any time prior to its exercise by delivering a written
statement to the Secretary of the Company that the proxy is revoked, by
presenting to the Company a later-dated proxy executed by the person
executing the prior proxy, or by attending the Annual Meeting and voting in
person.

Annual Report on Form 10-K

The Annual Report on Form 10-K, including financial statements for
the year ended December 31, 1997, which are being mailed to stockholders
together with this Proxy Statement, contains financial and other information
about the activities of the Company, but is not incorporated into this Proxy
Statement and is not to be considered a part of these proxy soliciting
materials.

ELECTION OF DIRECTORS

Five Directors of the Company, constituting the entire Board of
Directors, are to be elected at the 1998 AnnualMeeting to serve until the next
annual meeting and until their successors are elected and duly qualified.
Mr. J. SidneyDavenport, Mr. Richard C. Leone, Mr. Thomas H. Potts, Mr. Paul
S. Reid and Mr. Donald B. Vaden have been nominated bythe Board of Directors
for re-election to the Board of Directors at the Annual Meeting. Unless
authorization iswithheld, the persons named as proxies will vote FOR the
election of the nominees of the Board of Directors named above.
Each nominee has agreed to serve if elected. In the event any nominee
shall unexpectedly be unable to serve, the proxies will be voted for such
other person as the Board of Directors may designate. Selected
biographical information regarding each nominee is set forth below:

J. Sidney Davenport, 56, has been a Director of the Company since its
organization in December 1987. He was a Vice President of The Ryland Group,
Inc., a publicly-owned corporation engaged in residential housing
construction and mortgage-related financial services, from March 1981 to
January 1998. Mr. Davenport was Executive Vice President of Ryland
Mortgage Company from April 1992 to January 1998. Mr. Davenport served as
a Director of Mentor Income Fund, Inc., a publicly-traded closed-end mutual
fund, from June 1992 to August 1993.

Richard C. Leone, 57, has been a Director of the Company since
January 1988. He currently is the President of The Twentieth Century Fund,
a tax-exempt research foundation engaged in economic, political and social
policy studies. Mr. Leone is also a Director of seven Dreyfus mutual funds.

Thomas H. Potts, 48, has been President and a Director of the Company
since its organization in December 1987. Prior to that, Mr. Potts served in
various positions on behalf of The Ryland Group, Inc. Mr. Potts served as
Treasurer of The Ryland Group, Inc. from May 1987 until April 1992,
Executive Vice President of Ryland Acceptance Corporation ("Ryland
Acceptance")from November 1987 until April 1992, and Executive Vice President,
and previously Senior Vice President of Ryland Mortgage Company from April
1991 until April 1992. Mr. Potts also served as President and Director
of Mentor Income Fund, Inc. from its inception in December 1988 until June 1992.

Paul S. Reid, 49, has been a Director of the Company since January 1988.
Mr. Reid is currently the Executive Vice President of the Mortgage Bankers
Association of America. From 1989 until 1997, Mr. Reid served as the President
and Chief Executive Officer of American Home Funding, Inc., a wholly-owned
subsidiary of Rochester Community Savings Bank, an FDIC insured institution.

Mr. Reid has advised the Board that he may have to resign from the Board
due to a possible conflict of interest. In such event, the Board would nominate
a new director to fill the vacancy created by Mr. Reid's resignation.

Donald B. Vaden, 63, has been a Director of the Company since January
1988. In March 1995, Mr. Vaden resumed practicing law specializing in mediation
and arbitration, and is certified for general and family mediation by the
Supreme Court of Virginia. He serves as a director of the Virginia Mediation
Network, Inc. He is the retired past Chairman of Residential Home Funding
Corporation where he served from December 1992 until February 1995.


Information Concerning the Board of Directors

The members of the Audit Committee during 1997 were Mr. Davenport, Mr.
Reid and Mr. Vaden. The Audit Committee reviews and approves the scope of the
annual audit undertaken by the Company's independent certified public
accountantsand meets with them on a regular basis to review the progress and
results of their work as well as any recommendations they may make. The Audit
Committee held three regular meetings and one special meeting in 1997. The
Board of Directors also had a Compensation Committee during 1997 with the
members being Mr. Davenport, Mr. Leone, Mr. Reid and Mr. Vaden. The
Compensation Committee met two times in 1997. The Company has no other
standing committees of the Board of Directors.

The Board of Directors held four regular meetings and one special meeting
in 1997. During this period, each of the Directors attended at least 75% of
these meetings of the Board of Directors and the committees on which he served.

The Directors who are not employed by the Company (the "Outside
Directors") receive an annual fee of $25,000 per year, plus $500 for each
meeting of the Board of Directors, or a committee thereof, they attend.
In addition, these Directors are reimbursed for expenses related to their
attendance at Board of Directors and committee meetings.

In 1995, the Company adopted the 1995 Directors Stock Incentive Plan (the
"Directors Plan") pursuant to which Directors of the Company as of May 1, 1995,
who were not employees of the Company or its affiliates, each received an
initial grant of 7,000 Stock Appreciation Rights ("SARs"). Under the Directors
Plan, new Directors receive an initial grant of 5,000 SARs. Subsequent to these
initial grants, eligible Directors are granted 1,000 SARs annually through May
1, 1998. The exercise price of the SARs is equal to the market value of the
Company's common stock on the date of each grant. The SARs may be settled only
in cash. As authorized by the Directors Plan, on May 1, 1997, each eligible
Director received a grant of 1,000 SARs.

OWNERSHIP OF COMMON STOCK

The table below sets forth, as of December 31, 1997, the number of shares
of common stock beneficially owned by owners of more than five percent of the
Company's common stock outstanding, each Director of the Company, the
President, each of the other four executive officers named in the Summary
Compensation Table under "Management of the Company", and the number of
shares beneficially owned by all of the Company's Directors and officers
as a group. To the Company's knowledge, no other person beneficially
owns more than 5% of the outstanding shares of common stock. Unless
otherwise indicated, all persons named as beneficial owners of common
stock have sole voting power and sole investment power with respect to the
shares beneficially owned.