UNITED STATES
                   SECURITIES AND EXCHANGE COMMISSION
                          Washington, DC 20549

                             ____________


                              FORM 8-K

                           CURRENT REPORT

  Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

                     Date of Report: December 26, 2000


                            DYNEX CAPITAL, INC.
            (Exact Name of Registrant as Specified in Charter)


Virginia               1-9819                            52-1549373
(State or Other    (Commission File Number)           (IRS Employer
Jurisdiction of                                       Identification No.)
Incorporation)

      4551 Cox Road, Suite 300, Glen Allen, Virginia          23060
      (Address of Principal Executive Offices)              (Zip Code)


                                (804) 217-5800
           (Registrant's telephone number, including area code)



Item 5.       OTHER EVENTS.


     As previously  disclosed in other filings, on November 7, 2000, the Company
and California  Investment  Fund, LLC ("CIF") entered into an Agreement and Plan
of Merger, dated as of November 7, 2000 (the "Merger Agreement"),  by and among,
the Company, CIF and DCI Acquisition Corporation,  a newly created subsidiary of
CIF. The Merger Agreement  provides for CIF to acquire 100% of the equity of the
Company for a purchase price of $90 million in cash.

     On December 22, 2000, the Company  delivered a letter to CIF which declared
that CIF was in breach  of the  terms of the  Merger  Agreement.  The  breach is
related to CIF's  obligation  to provide  certain  evidence of  financing of the
transaction in accordance with the terms of the Merger Agreement. In the letter,
the Company also  reserved its rights to terminate  the Merger  Agreement if CIF
does not agree to  satisfy  certain  conditions  relating  to the  obtaining  of
financing and other matters.

              .



Item 7.      FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.

(c)      Exhibits

99.1     Dynex Capital, Inc. Press Release, dated December 22, 2000.






                                                        SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned hereunto duly authorized.


Date:    December 26, 2000                            DYNEX CAPITAL, INC.


                                                  By:      /s/
                                                           Thomas H. Potts
                                                           President




                                                       EXHIBIT INDEX

Number            Description                                  Method of Filing

99.1          Dynex Capital, Inc. Press Release,               Filed herewith
                  dated December 22, 2000.



                               Exhibit  99.1



                          PRESS RELEASE


FOR IMMEDIATE RELEASE                              CONTACT:   Kathy Fern
December 22, 2000                                             804-217-5800


                                     DYNEX CAPITAL, INC.
                           UPDATES MARKET ON STATUS OF MERGER WITH
                                 CALIFORNIA INVESTMENT FUND


     Dynex  Capital,  Inc.  (NYSE:  DX)  announced  today  that in a  letter  to
California  Investment  Fund,  LLC ("CIF") dated  December 22, 2000, the Company
declared CIF in breach of the terms of the merger agreement entered into between
the parties on  November  7, 2000.  The breach  relates to CIF's  obligation  to
provide certain evidence of financing in accordance with the terms of the merger
agreement.  In the letter,  Dynex  reserved  the right to  terminate  the merger
agreement with CIF for such breach if CIF does not agree to and satisfy  certain
conditions relating to obtaining financing and other matters. CIF has until 5:00
PM Eastern  Time on  Wednesday,  December  27, 2000 to agree to the terms of the
letter.

     Separately,  as previously reported,  the Company's credit facility agented
by Chase  Bank of Texas,  related to the  letters  of credit on its  multifamily
tax-exempt bonds,  expired as of the end of October. The Company has been unable
to secure a formal extension of such agreement,  but the lenders thereunder have
not taken any adverse actions at this time.

     The  Company  also  announced  that it will not  declare a dividend  to the
Series A, Series B and Series C preferred shareholders for the fourth quarter of
2000.  Dividends on the preferred  stock are  cumulative  and the Company is not
permitted  to pay  any  dividends  on its  common  stock  until  the  cumulative
preferred  dividends  have been declared and paid in full.  The preferred  stock
dividends are current  through the July 31, 1999 payment date.  The Company also
reported that it will not pay a dividend on its common stock for the quarter.

     Dynex  Capital,  Inc. is a  financial  services  company  that elects to be
treated  as a real  estate  investment  trust  (REIT)  for  federal  income  tax
purposes. Note: This document contains  "forward-looking  statements"(within the
meaning  of the  Private  Securities  Litigation  Act of 1995)  that  inherently
involve  risks and  uncertainties.  The  Company's  actual  results could differ
materially  from those  anticipated  in these  forward-looking  statements  as a
result of unforeseen  external  factors.  As discussed in the Company's  filings
with the SEC,  these  factors may  include,  but are not limited to,  changes in
general economic conditions, disruptions in the capital markets, fluctuations in
interest rates, increases in costs and other general competitive factors.

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