SECURITIES AND EXCHANGE COMMISSION
                                   Washington, D.C. 20549

                                  SCHEDULE 14A INFORMATION

                         Proxy Statement Pursuant to Section 14(a)
                           of the Securities Exchange Act of 1934

Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [    ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential,for use of the Commission Only(as permitted by Rule 14a(e)(12))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[X] Soliciting Material under Rule14a-12

                   Dynex Capital, Inc.
                 (Name of Registrant as Specified in its Charter)

      (Name of Person(s) Filing Proxy Statement if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
[ X]  No fee required.
[    ]  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
      1)   Title of each class of securities to which transaction applies:

      2)   Aggregate number of securities to which transaction applies:

     3) Per unit  price  or  other  underlying  value  of  transaction  computed
pursuant to Exchange Act Rule 0-11(set  forth the amount in which the filing fee
is calculated and state how it was determined):

      4)   Proposed maximum aggregate value of transaction:

     [ ] Check box if any part of the fee is offset as provided by Exchange  Act
Rule  0-11(a)(2)  and identify the filing for which the  offsetting fee was paid
previously.  Identify the previous filing by registration  statement  number, or
the Form or Schedule and the date of its filing. 1) Amount Previously Paid:

      2)   Form, Schedule or Registration Statement No.:

      3)   Filing Party:

      4)   Date Filed:





                          PRESS RELEASE


FOR IMMEDIATE RELEASE                                 CONTACT:   Kathy Fern
December 28, 2000                                                804-217-5800


                                                    DYNEX CAPITAL, INC.
                                           ANNOUNCES CALIFORNIA INVESTMENT FUND
                                                      EXECUTES LETTER


     Dynex Capital,  Inc. (NYSE: DX) announced today that California  Investment
Fund, LLC ("CIF") has executed the letter sent by the Company dated December 22,
2000. As previously reported, the Company declared that CIF was in breach of its
obligation to provide certain evidence of financing in accordance with the terms
of the merger agreement entered into between the parties on November 7, 2000 and
sent a letter to CIF to that  effect on  December  22nd.  Under the terms of the
countersigned December 22nd letter, CIF has now agreed to deliver to the Company
on or before  January 25, 2001 "written  binding  commitment(s)"  or "definitive
agreements"  from one or more third  parties  sufficient to provide CIF with the
financing  necessary  to  consummate  the  transaction,  as well as the  written
consent to the merger  transaction,  including  the  financing,  by a sufficient
number of the holders of the  Company's  senior  unsecured  notes due July 2002.
Pursuant to the December 22nd letter  agreement,  if CIF does not satisfy either
of these additional obligations, the Company has reserved its right to terminate
the  merger  agreement  for the  declared  breach  and/or  for any breach of the
additional obligations. Although CIF sent a letter to the Company dated December
26, 2000 indicating  that it does not agree with the Company's  declaration of a
breach under the merger agreement,  CIF nevertheless  executed the December 22nd
letter.

     The Company also announced that, at CIF's request,  the parties agreed that
the revised  date for the filing of the  preliminary  proxy  materials  with the
Securities and Exchange  Commission would be January 29, 2001.  Shareholders are
urged to read the  proxy  statement  when it  becomes  available,  and any other
relevant  documents  filed with the SEC,  because  such  documents  will contain
important information regarding the merger transaction.

     The  merger  is  subject  to  financing,  shareholder  approval  and  other
customary  conditions  and  there  can be no  assurance  at this  time  that the
requirements  or conditions set forth in the merger  agreement will be satisfied
and the merger completed.

     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.
                                # # #

WHERE YOU CAN FIND ADDITIONAL INFORMATION

     Investors  and  security  holders  of Dynex are  advised  to read the proxy
statement  regarding the proposed  merger when it becomes  available  because it
will contain important  information  about the transaction.  The proxy statement
will be filed with the Securities and Exchange  Commission by Dynex and security
holders  of Dynex  may  obtain a free  copy of the  proxy  statement  when it is
available and other  documents  filed by Dynex with the  Securities and Exchange
Commission at the Securities and Exchange  Commission's  website at www.sec.gov.
The proxy statement and these other documents may also be obtained for free from
Dynex's  Corporate  Secretary  located at 4551 Cox Road,  Suite 300, Glen Allen,
Virginia, 23060 or by telephone at (804) 217-5800.

     Dynex  and  its  executive  officers  and  directors  may be  deemed  to be
participants  in the  solicitation  of proxies from  stockholders  of Dynex with
respect to the transactions  contemplated by the merger  agreement.  Information
regarding such officers and directors is included in Dynex's Proxy Statement for
its Special  Meeting of Preferred  Stockholders  filed with the  Securities  and
Exchange  Commission  on October 31,  2000.  This  document is  available at the
Securities  and Exchange  Commission's  website at  http://www.sec.gov  and from
Dynex.