8-K

                                  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: February 25, 1999


                               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)

10900 Nuckols Road, 3rd Floor, 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 disclosed in previous  filings,  on June 10, 1998,  Dynex Capital,  Inc.
(the "Company" or "Dynex")  entered into various  agreements (the  "Agreements")
with  AutoBond  Acceptance  Corporation  ("AutoBond")  (Amex:  ABD) and AutoBond
Master Funding Corporation V ("Funding"), a wholly-owned subsidiary of AutoBond,
whereby the Company would provide  Funding with limited  funding over a one year
period to finance its purchase of retail installment  contracts from AutoBond up
to $20 million per month. These Agreements were subsequently amended to increase
the  funding  amount to $25  million  per month and to extend  the term  through
November  30,  1999.  AutoBond  is a specialty  consumer  finance  company  that
underwrites,  acquires,  services and securitizes retail  installment  contracts
originated  by  automobile  dealers to borrowers  that are credit  impaired.  In
exchange,  the  Company,  through an  affiliate,  received an option to purchase
5.5  million  shares of common stock of AutoBond  held by the three  principal
shareholders  of  AutoBond,  for a price of $6.00 per share.  The  Company  also
purchased  from  AutoBond a $3.0 million  senior note  convertible  into 500,000
shares of AutoBond's  common stock. To date, the Company has funded $169 million
of funding  notes  related to auto  contracts  with a principal  balance of $163
million.  As of February 15, 1999, the outstanding  balance of the collateral is
$145 million and the  outstanding  balance of the funding notes is $149 million.
The funding notes had a weighted average coupon of 7.7% and the collateral has a
weighted  average coupon of 19.8%.  The funding notes receive all the cash (less
servicing  fees)  received  on the auto loans  until paid in full.  The  Company
finances  these  funding  notes with a $100 million  committed  credit  facility
through Daiwa Finance Corp.

     In  anticipation  of  exercising  the  stock  option  and  also to  perform
compliance review procedures as allowed for under the Agreements, Dynex notified
AutoBond in late December that the Company would be performing due diligence and
compliance procedures beginning January,  1999. Dynex hired outside consultants,
experienced in subprime auto lending,  to assist in designing and performing the
various tests and procedures. These tests and procedures included, among others,
the  testing  of  compliance  with  AutoBond's  underwriting  criteria  using  a
statistically  significant sample of loans. In late January,  Dynex received the
results from the  underwriting  compliance tests which showed that a significant
number of loans  contained  material  deviations  from  AutoBond's  underwriting
criteria.  Also during the due  diligence  process,  AutoBond  failed to provide
Dynex and its consultants  with a significant  amount of requested  information.
Based on these  findings and  results,  the Company  notified  AutoBond of these
breaches to the  Agreements,  and  discontinued  funding.  Subsequent  to giving
AutoBond notice of the breaches,  Dynex personnel and one of the consultants met
with  AutoBond  personnel  over a three day period to review the  results of the
underwriting  compliance  tests.  As  Dynex  maintained  its  position  that the
underwriting  criteria were those attached to the  Agreements,  the parties were
unable to agree on the  underwriting  criteria under which the loan files should
be  tested.  Since  February  8, 1999,  AutoBond  has  refused  access for Dynex
personnel,  its advisors and consultants to the loan files and related  records,
creating an additional breach under the Agreements.

     As a consequence of the breaches by AutoBond,  Dynex has filed suit against
AutoBond  in the  Federal  district  court of the  Eastern  District of Virginia
seeking  declaratory  relief with  respect to its rights and  obligations  under
these Agreements. AutoBond has filed suit against Dynex in the district court of
Travis County, Texas alleging breach of contract and other claims.

     The outside  consultants  also  performed  various tests and  procedures to
determine AutoBond's compliance with its servicing procedures and guidelines. In
early February,  Dynex received the results from the servicing compliance tests,
which highlighted certain irregularities. Based upon such report, Dynex analyzed
the loan data information that it has received monthly from AutoBond. Based upon
such  analysis,  Dynex  determined  that  the  delinquency  ratio  reported  and
certified by AutoBond was understated,  and that the delinquency  ratio was such
that a  "Triggering  Event" had occurred as specified  in the  Agreements.  Such
Triggering Event allowed Dynex to immediately terminate AutoBond as servicer. On
February 22, 1999, Dynex notified AutoBond that it was terminating its servicing
arrangement  due  to  the  Triggering   Event,  and  named  Systems  &  Services
Technologies as successor servicer.

     To this date  AutoBond  has still denied Dynex access to the loan files and
related information, and has not cooperated on the servicing transfer.



Item 7.       FINANCIAL STATEMENTS AND EXHIBITS.

Exhibit
Number        Exhibit
99.1          Dynex Capital, Inc. Press Release, dated February 25, 1999
              (filed herewith).




                                   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:    February 25, 1999               DYNEX CAPITAL, INC.


                                         By:     /s/ Lynn K. Geurin

                                                 Lynn K. Geurin
                                                 Executive Vice President and
                                                 Chief Financial Officer










                                  EXHIBIT INDEX



                                                                  Sequentially
Exhibit                                                           Numbered Page

Dynex Capital, Inc. Press Release, dated February 25, 1999.              I

EX-99.1

                                                            Exhibit 99.1
[Company Logo]
PRESS RELEASE


FOR IMMEDIATE RELEASE
February 25, 1999


CONTACT:   Kathy Fern
804-217-5800


DYNEX CAPITAL, INC. UPDATES MARKET ON CERTAIN RECENT DEVELOPMENTS

     Dynex  Capital,  Inc.  (NYSE:  DX) filed  today an 8-K  relating  to recent
developments in its relationship  with AutoBond  Acceptance  Corporation  (Amex:
ABD). During January, as a result of a review conducted on its behalf by outside
consultants  experienced  in subprime auto  lending,  Dynex  discovered  certain
breaches by AutoBond of its representations,  warranties and covenants under its
agreements with Dynex.  These breaches included,  among other items,  AutoBond's
failure  to  follow  required  underwriting  standards  in  accordance  with the
agreements,  and  AutoBond's  failure to give Dynex access to its loan files for
review, as provided for in the agreements.

     Dynex  notified  senior  management of AutoBond of these breaches and, as a
result of such breaches,  has ceased to make additional fundings as provided for
under the governing  agreements.  Dynex also filed suit against  AutoBond in the
Federal district court of the Eastern  District of Virginia seeking  declaratory
relief  with  respect to its  rights and  obligations  under  these  agreements.
AutoBond has filed suit against  Dynex in the district  court of Travis  County,
Texas alleging  breach of contract and other claims.  Dynex believes  AutoBond's
claims are without merit and intends to defend against them vigorously.

     On February 22, 1999,  Dynex  terminated  its  servicing  arrangement  with
AutoBond due to the occurrence of an event of servicing  termination as provided
for in the  agreements.  Dynex has named a  third-party  servicer  to assume the
servicing  responsibilities.  To date, AutoBond has not complied with provisions
of the  servicing  termination,  including the failure to surrender all files in
its possession related to the servicing of the collateral.

     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. The Company's primary production operations include the origination of
mortgage loans secured by multifamily and commercial real estate  properties and
the  origination of loans secured by  manufactured  homes.  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.