PROSPECTUS SUPPLEMENT
     (To Prospectus and Prospectus Supplement Dated March 6, 1997)

                                  55,000 Shares

                                   
                               DYNEX CAPITAL, INC.

                        SHARES OF COMMON STOCK
                                (Par Value $0.01)


      Pursuant to a Sales Agency Agreement dated as of March 6, 1997 (the "Sales
Agency Agreement")  between Dynex Capital,  Inc. (the "Company") and PaineWebber
Incorporated  ("PaineWebber"),  a form of which has been  filed as an exhibit to
the  Registration  Statement of which this  Prospectus  Supplement is a part and
which is  incorporated  by  reference  herein,  the  Company  has sold,  through
PaineWebber,  as agent of the Company,  55,000  shares of the  Company's  common
stock,  par value  $0.01 per share (the  "Common  Stock"),  pursuant to ordinary
brokers' transactions on the New York Stock Exchange (the "NYSE").

      Shares sold during Pricing Period


                           
               22,000  Average Market Price Shares
               33,000  Additional Shares
               ------
               55,000  Total Shares Sold


      Arithmetic Mean of the High and Low Sales Prices of the Shares reported on
            the NYSE (the  "Average  Market  Price") for each day of the Pricing
            Period:


 
                                                        
                                                                  Average (or Total)
          09/22/97   09/23/97   09/24/97   09/25/97    09/26/97   for Pricing Period      
          --------   --------   --------   --------    --------    -----------------  
          $14.96875  $15.0625   $15.15625  $15.21875  $14.78125       $15.0375


       High and Low Sales Prices at which Average Market Shares were sold during
pricing period:

                 High: $15.2500                     Low: $14.7500



Average Market Price Shares:
- ---------------------------
                                                                               

Gross Proceeds to Company.......$ 330,825.00           Gross Sales Proceeds.........$ 330,812.50
3.0% Discount..............   ..$   9,924.75           Compensation to Agent........$   9,912.25
                                ------------                                      ---------------
Net Proceeds to Company.........$ 320,900.25            Net Proceeds to Company.....$ 320,900.25

Additional Shares Sold:
- ----------------------

Gross Proceeds to Company.......$495,331.25
Commission to PaineWebber.......$ 14,859.94
                                -----------
Net Proceeds to Company.........$480,471.31

Total Net Proceeds to Company...$801,371.56            Total Compensation to Agent$..$ 24,772.19

On the last day of the Pricing  Period,  the last reported  sales price 
of the Stock on the NYSE was......................................................... $  14.7500

Note:.S.E.C.  fees  were  not  used  in  arriving  at any of the  above
figures.



 ......THESE  SECURITIES  HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND  EXCHANGE  COMMISSION  OR  ANY  STATE  SECURITIES  COMMISSION  NOR  HAS  THE
SECURITIES AND EXCHANGE  COMMISSION OR ANY STATE  SECURITIES  COMMISSION  PASSED
UPON THE  ACCURACY OF THIS  PROSPECTUS  SUPPLEMENT.  ANY  REPRESENTATION  TO THE
CONTRARY IS A CRIMINAL OFFENSE.

     The date of this Prospectus Supplement is September 30, 1997.