UPLOAD: SEC-generated letter

Mail Stop 4561
November 3, 2005

Mr. Stephen J. Benedetti
Principal Executive and Chief Financial Officer
Dynex Capital, Inc
4551 Cox Rd. Suite 300
Glen Allen, VA 23060-6740

Re: Dynex Capital, Inc.
Form 10-K for Fiscal Year Ended December 31, 2004
Form 10-Q for the Quarterly Period Ended March 31, 2005
Form 10-Q for the Quarterly Period Ended June 30, 2005
File No. 1-09819

Dear Mr. Benedetti:

We have reviewed your filings and have the following
comments.
We have limited our review to only the issues addressed below and
will make no further review of your documents. In our comments,
we
ask you to provide us with information so we may better understand
your disclosures. After reviewing this information, we may raise
additional comments.

Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.

Form 10-K for the Fiscal Year Ended December 31, 2004

Item 7 - Management`s Discussion and Analysis of Financial
Condition
and Results of Operations

Non-GAAP Information on Securitized Finance Receivables and Non-
Recourse Securitization Financing

1. Please explain to us in sufficient details how you considered
each
of the requirements of Item 10(e) of Regulation S-K in preparing
your
disclosure. Your response should address, but not limited to, the
reconciliation requirements as they relate to your presentation of
"Principal Balance of Net Investment", "Amortized Cost Basis of
Net
Investment", "Fair Value of Net Investment", "Cash flows received
in
2004, net" and the cumulative $1.1 million provision for loan
losses
on loans in which you do not retain the credit risk.

Financial Statements

Report of Independent Registered Public Accounting Firm

2. Please confirm to us that you have a signed audit opinion and
that
you will include a conforming signature in future filings.

Note 1 Basis of Presentation

3. Please explain to us the purpose of the disclosure in third
paragraph that refer to "normal recurring accruals" and
"condensed"
consolidated financial statements.

Note 13 - Preferred and Common Stock

4. We note that you completed a recapitalization of your preferred
stock in 2004. Please reconcile this footnote to your
consolidated
statements of shareholders` equity, operations and cash flows and
explain to us how you accounted for this transaction. Tell us how
you
applied EITF D-42 and EITF D-53 and any other relevant accounting
literature that you used to support your accounting. Also, clarify
whether the redemption of the preferred stock is solely at your
option.

Please respond to these comments within 10 business days or
tell us when you will provide us with a response. Please file
your
response on Edgar.

We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings to be certain that the
filings include all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.

In connection with responding to our comments, please provide, in
writing, a statement from the company acknowledging that

* the company is responsible for the adequacy and accuracy of the
disclosure in the filings;

* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filings; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.

In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filings or
in
response to our comments on your filings.

You may contact Thomas Flinn, Staff Accountant, at (202)
551-
3469 or the undersigned at (202) 551-3414 if you have questions.
Sincerely,


Jorge Bonilla
Senior Staff Accountant





Mr. Stephen J. Benedetti
Dynex Capital, Inc.
November 3, 2005
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