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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   ___________

                                    FORM 8-K


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

          Date of Report (Date of earliest event reported): May 9, 2005
                                   ___________

                               DYNEX CAPITAL, INC.
             (Exact name of registrant as specified in its charter)

          Virginia                     1-9819                   52-1549373
(State or other jurisdiction  (Commission File Number)       (I.R.S. Employer
     of incorporation)                                     Identification No.)

          4551 Cox Road, Suite 300
            Glen Allen, Virginia                              23060
  (Address of principal executive offices)                  (Zip Code)

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

                                 Not Applicable
          (Former name or former address, if changed since last report)


     Check the  appropriate  box below if the Form 8-K  filing  is  intended  to
simultaneously  satisfy the filing obligation of the registrant under any of the
following provisions:

     |_| Written  communications  pursuant to Rule 425 under the  Securities Act
         (17 CFR 230.425)

     |_| Soliciting  material  pursuant  to  Rule 14a-12 under  the Exchange Act
         (17 CFR 240.14a-12)

     |_| Pre-commencement  communications  pursuant to  Rule 14d-2(b)  under the
         Exchange Act (17 CFR 240.14d-2(b))

     |_| Pre-commencement  communications  pursuant  to Rule 13e-4(c)  under the
         Exchange Act (17 CFR 240.13e-4(c))

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Item 1.01  Entry into a Material Definitive Agreement.

     On  May 9,  2005,  Dynex  Capital,  Inc.  ("Dynex"),  MSC  I,  L.P.,  MERIT
Securities  Corporation and Issued Holdings Capital  Corporation  (IHCC), all of
which are subsidiaries of Dynex  (collectively,  the "Company"),  entered into a
purchase agreement with Highland  Undertakings,  LLC ("Highland") (the "Purchase
Agreement").  Under the Purchase  Agreement,  the Company sold to Highland (or a
subsidiary  of  Highland)   (i)  the  stock  of  a   subsidiary,   (ii)  certain
securitization  financing bonds that it owned,  and (iii) the Company's right to
redeem one or more classes of  securitization  bonds that it has issued pursuant
to the terms of the respective indentures. In addition, IHCC and a subsidiary of
Highland  entered into a derivative  transaction  whereby IHCC  received a fixed
payment on or about the closing date of the Purchase Agreement and agreed to pay
to such subsidiary of Highland certain payments if and when certain funds become
available  to the  Company in the  future.  The payment by IHCC will be based on
amounts  available  for  distribution  to the  surplus  account  as that term is
defined in the respective indenture for a particular  securitization  trust. The
aggregate purchase price under the Purchase Agreement was $9,000,000.

     The Purchase Agreement  contained  representations and warranties and other
covenants and undertakings typical for a transaction of this nature.




                                    SIGNATURE

     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.

                               DYNEX CAPITAL, INC.




Date:    May 13, 2005                   By:  /s/ Stephen J. Benedetti
                                              Stephen J. Benedetti
                                              Executive Vice President and
                                              Chief Financial Officer