T-3: Initial application for qualification of trust indentures

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.

FORM T-3

FOR APPLICATIONS FOR QUALIFICATION OF INDENTURES
UNDER THE TRUST INDENTURE ACT OF 1939

DYNEX CAPITAL, INC.
(NAME OF APPLICANT)


4551 COX ROAD, SUITE 300
GLEN ALLEN, VIRGINIA 23060
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)

- --------------------------------------------------------------------------------


Securities to be Issued Under the Indenture to be Qualified


Title of Class Amount
- -------------- ------

9.50% Senior Notes Due 2005 Up to a maximum aggregate principal amount
of $30,000,000

- --------------------------------------------------------------------------------

Approximate date of proposed public offering:

As soon as practicable after the date of this Application for Qualification.


Name and address of agent for service:

Stephen J. Benedetti, Chief Financial Officer
DYNEX CAPITAL, INC.
4551 Cox Road, Suite 300
Glen Allen, Virginia 23060
(804) 217-5800

COPY TO:
Elizabeth R. Hughes, Esquire
VENABLE, BAETJER & HOWARD, LLP
8010 Towers Crescent Drive, Suite 300
Vienna, Virginia 22182
(703) 760-1600



GENERAL


1. General Information.

a. Form of Organization: Corporation

b. State under the laws of which organized: Virginia


2. Securities Act exemption applicable.

This Form T-3 relates to the offer by Dynex Capital, Inc., a Virginia
corporation ("Dynex" or the "Company") to exchange up to an aggregate of 492,425
shares of its Series A Preferred Stock, up to an aggregate 662,944 shares of its
Series B Preferred Stock, and up to an aggregate 683,703 shares of its Series C
Preferred Stock (or, in each case, such lesser number of shares as are properly
tendered and not properly withdrawn), for cash, 9.50% Senior Notes, due February
28, 2005 (the "Senior Notes"), or a combination of cash and Senior Notes, in
each instance, subject to the terms and conditions of the Offering Circular,
dated January 8, 2003, which is incorporated by reference in Exhibit T3E(i) to
this Form T-3.

The issuance of the Senior Notes is exempt from registration under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to the
exemption provided by Section 3(a)(9) of the Securities Act. Section 3(a)(9)
provides for an exemption from registration for any security exchanged by an
issuer with its existing security holders exclusively where no commission or
other remuneration is paid or given directly or indirectly for soliciting such
exchange. There will not be any sales of securities of the same class as the
Senior Notes (other than pursuant to the Offer) by the Company or by or through
an underwriter at or about the same time as the transaction for which the
exemption is claimed. No consideration has been, or is to be given, directly or
indirectly, to any person in connection with the transaction, except for
customary payments to be made in respect of preparation, printing, and mailing
of the Offering Circular in connection with the Offer and related documents and
the engagement of MacKenzie Partners, Inc., as information agent for the
Company, Wachovia Bank, N.A., as exchange agent for the Company and as trustee
under the Indenture. No shareholder of the Company has made or will be requested
to make any cash payment to the Company in connection with the Offer.



AFFILIATIONS


3. Affiliates.

The Company owns 100% of the capital stock each of the subsidiaries set forth
below.

Issuer Holding Corp.
Dynex Securities Corporation
GLS Capital Services, Inc.
Dynex Commercial Services, Inc.
SMFC Funding Corporation

See Item 4 for directors and executive officers of the Company, some of
whom may be deemed to be affiliates of the Company by virtue of their position.



MANAGEMENT AND CONTROL


4. Directors and Executive Officers

The following persons are the directors and/or executive officers of
Dynex as of December 31, 2002:

Name Position
- --------------------------------------------------------------------------
J. Sidney Davenport Director
Thomas H. Potts Director
Barry S. Shein Director
Donald B. Vaden Director
Eric P. Von der Porten Director
Leon A. Felman Director
Barry Igdaloff Director
Stephen J. Benedetti Executive Officer

The address of each director and executive officer listed above is, c/o
Dynex Capital, Inc., 4551 Cox Road, Suite 300, Glen Allen, Virginia 23060.


5. Principal Owners of Voting Securities.

As of December 31, 2002, to the best of the Company's knowledge, no person
beneficially owned more than 10% of its outstanding voting securities.


6. Underwriters.

(a) not applicable

(b) not applicable



CAPITAL SECURITIES


7. Capitalization.

Capitalization as of December 31, 2002.

a. Authorized Classes of Securities

Title of Class Amount Authorized Amount Outstanding
- -------------- ----------------- ------------------

Common Stock 100,000,000 10,873, 903

Preferred Stock 50,000,000 3,754,277*

* The outstanding Preferred Stock consists of the following:

Amount Outstanding
------------------

Series A Convertible Preferred 992,038
Series B Convertible Preferred 1,378,707
Series C Convertible Preferred 1,383,532

b. Outline of Voting Rights

Common Stock. Holders of shares of the Company's common stock are
entitled to notice of, and to vote at, the Company's Annual Meeting. Each share
of common stock outstanding is entitled to one vote for each of the directors to
be elected by the holders of common stock at the Annual Meeting and one vote on
each other matter presented to common stockholders.

Preferred Stock. Holders of shares of the Company's Preferred Stock are
currently entitled to notice of, and to vote at, the Company's Annual Meeting,
voting as a single class, to elect two directors to the Company's Board of
Directors. Pursuant to the Company's Articles of Incorporation, as amended, each
share of Preferred Stock is entitled to one vote per $24.00 of stated
liquidation preference. The stated liquidation preference of the Series A
Preferred Stock is $24.00 per share, the stated liquidation preference of the
Series B Preferred Stock is $24.50 per share, and the stated liquidation
preference of the Series C Preferred Stock is $30.00 per share. Accordingly,
holders of the Series A Preferred Stock are entitled to 1.000 vote per share,
holders of the Series B Preferred Stock are entitled to 1.021 votes per share,
and holders of Series C Preferred Stock are entitled to 1.250 votes per share.
The holders of Preferred Stock may lose the right to elect directors to the
Company's Board of Directors should the Company pay all dividends in arrears due
holders of Preferred Stock. Holders of Preferred Stock are entitled to elect
directors to the Company's Board of Directors when (i) dividends to holders of
Preferred Stock are in arrears by six quarters, or (ii) the consolidated
shareholders' equity of the Company falls below certain specified levels.



INDENTURE SECURITIES

8. Analysis of Indenture provisions.

The following discussion is a description of certain provisions of the
Indenture to which this filing relates, as required by Section 305(a)(2) of the
Trust Indenture Act of 1939, as amended (the "Act"). This discussion is
qualified in its entirety by reference to the Indenture, a copy of which is
filed as Exhibit T3C hereto.

(a) Events of Default: Withholding Notice

An Event of Default is defined in the Indenture as being, among other
things: default in payment of the principal on the Senior Notes when due, at
maturity, upon redemption or otherwise, including failure by the Company to
purchase the Senior Notes when required (whether or not such payment shall be
prohibited by the subordination provisions of the Indenture); default for 30
days in payment of any installment of interest on the Senior Notes; default by
the Company for 90 days after notice in the observance or performance of any
other covenants in the Indenture; failure to pay certain indebtedness for money
borrowed under any mortgage, indenture, or instrument aggregating $25 million or
more; final judgments or decrees entered into by a court of competent
jurisdiction against the Company, which have not been vacated, discharged,
satisfied or stayed pending appeal within 60 days of entry, involving
liabilities of $40 million or more after deducting the portion of such
liabilities accepted by an insurance company; or certain events involving
bankruptcy, insolvency or reorganization of the Company. The Indenture provides
that the trustee may withhold notice to the holders of Senior Notes of any
default (except in payment of principal or interest with respect to the Senior
Notes) if the trustee, in good faith, considers it in the interest of the
holders of the Senior Notes to do so.

The Senior Note Indenture provides that if an Event of Default (other
than an Event of Default with respect to certain events, including bankruptcy,
insolvency or reorganization of the Company) shall have occurred and be
continuing, the trustee or the holders of not less than 25% in aggregate
principal amount of the Senior Notes then outstanding may declare the principal
on the Senior Notes to be due and payable immediately, but if the Company shall
pay or deposit with the trustee a sum sufficient to pay all matured installments
of interest on all Senior Notes and the principal on all Senior Notes that have
become due other than by acceleration and certain expenses and fees of the
trustee and if all defaults (except the nonpayment of interest on and principal
of any Senior Notes which shall have become due by acceleration) shall have been
cured or waived and certain other conditions are met, such declaration may be
canceled and past defaults may be waived by the holders of a majority in
principal amount of the Senior Notes then outstanding.

The holders of a majority in aggregate principal amount of the Senior
Notes then outstanding shall have the right to direct the time, method and place
of conducting any proceedings for any remedy available to the trustee, subject
to certain limitations specified in the Indenture. The Indenture provides that,
subject to the duty of the trustee following an Event of Default to act with the
required standard of care, the trustee will not be under an obligation to
exercise any of its rights or powers under the Indenture at the request or
direction of any of the holders, unless the trustee receives satisfactory
indemnity against any associated costs, liability or expense.

(b) Authentication and Delivery

Pursuant to the Indenture, the Trustee may appoint an authenticating
agent that shall be authorized to act on its behalf and subject to its direction
in the authentication and delivery of notes in connection with the original
issuance thereof and transfers and exchanges of notes as fully to all intents
and purposes as though the authenticating agent had been expressly authorized by
this Indenture and those sections to authenticate and deliver notes. For all
purposes of the Indenture, the authentication and delivery of notes by the
authenticating agent shall be deemed to be authentication and delivery of such
Senior Notes "by the Trustee" and a certificate of authentication executed on
behalf of the Trustee by an authenticating agent shall be deemed to satisfy any
requirement in the Indenture or in the notes for the Trustee's certificate of
authentication. Such authenticating agent shall at all times be a person
eligible to serve as Trustee.

The Senior Notes will be issued in exchange for Preferred Stock
pursuant to the Offer. Consequently, the Company will receive no proceeds from
the issuance of the Senior Notes.

(c) The release of any property subject to the lien on the property.

The Senior Notes are not secured by any assets of the Company.

(d) Satisfaction and Discharge of the Indenture

The Senior Note Indenture will cease to be of further effect as to all
outstanding Senior Notes (except as to (i) rights of the holders of Senior Notes
to receive payments of principal and interest on, the Senior Notes, (ii) our
right of optional redemption, (iii) rights of registration of transfer and
exchange, (iv) substitution of apparently mutilated, defaced, destroyed, lost or
stolen Senior Notes, (v) rights, obligations and immunities of the trustee under
the Indenture and (vi) rights of the holders of Senior Notes as beneficiaries of
the Indenture with respect to the property so deposited with the trustee payable
to all or any of them) if (A) we will have paid or caused to be paid the
principal and interest on the Senior Notes as and when the same will have become
due and payable or (B) all outstanding Senior Notes (except lost, stolen or
destroyed Senior Notes which have been replaced or paid) have been delivered to
the trustee for cancellation or (C) (x) the Senior Notes not previously
delivered to the trustee for cancellation will have become due and payable or
are by their terms to become due and payable within one year or are to be called
for redemption under arrangements satisfactory to the trustee upon delivery of
notice and (y) we will have irrevocably deposited with the trustee, as trust
funds, cash, in an amount sufficient to pay principal of and interest on the
outstanding Senior Notes, to maturity or redemption, as the case may be. Such
trust may only be established if such deposit will not result in a breach or
violation of, or constitute a default under, any agreement or instrument
pursuant to which we are a party or by which we are bound and we have delivered
to the trustee an officers' certificate and an opinion of counsel, each stating
that all conditions related to such defeasance have been complied with.

The Senior Note Indenture will also cease to be in effect (except as
described in clauses (i) through (vi) in the immediately preceding paragraph)
and the indebtedness on all outstanding Senior Notes will be discharged on the
123rd day after the irrevocable deposit by the Company with the trustee, in
trust, specifically pledged as security for, and dedicated solely to, the
benefit of the holders of the Senior Notes, of cash, U.S. Government Obligations
(as defined in the Indenture) or a combination thereof, in an amount sufficient,
in the opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the trustee, to pay
the principal and interest on the Senior Notes then outstanding in accordance
with the terms of the Indenture and the Senior Notes ("legal defeasance"). Such
legal defeasance may only be effected if (i) no Event of Default has occurred or
is continuing, (ii) such deposit will not result in a breach or violation of, or
constitute a default under, any agreement or instrument to which the Company is
a party or by which it is bound, (iii) the Company has delivered to the trustee
an opinion of counsel stating that (A) the Company has received from, or there
has been published by, the Internal Revenue Service a ruling or (B) since the
date of the Indenture, there has been a change in the applicable federal income
tax law, in either case to the effect that, based thereon, the holders of the
Senior Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit, defeasance and discharge by the Company
and will be subject to federal income tax on the same amount and in the same
manner and at the same times as would have been the case if such deposit,
defeasance and discharge had not occurred, (iv) the Company has delivered to the
trustee an opinion of counsel to the effect that after the 123rd day following
the deposit, the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally and (v) the Company has delivered to the trustee an officers
certificate and an opinion of counsel stating that all conditions related to the
defeasance have been complied with. The Company may also be released from its
obligations under the covenants contained in the "Change of Control" and
"Consolidation, Merger, Sale, Conveyance, Transfer and Lease" sections of the
Indenture with respect to the Senior Notes outstanding on the 123rd day after
the irrevocable deposit by the Company with the trustee, in trust, specifically
pledged as security for, and dedicated solely to, the benefit of the holders of
the Senior Notes, of cash, U.S. Government Obligations or a combination thereof,
in an amount sufficient in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the trustee, to pay the principal and interest on the Senior Notes
then outstanding in accordance with the terms of the Indenture and the Senior
Notes ("covenant defeasance").

Such covenant defeasance may only be effected if (i) no Event of
Default has occurred or is continuing (ii) such deposit will not result in a
breach or violation of, or constitute a default under, any agreement or
instrument to which the Company is a party or by which it is bound, (iii) the
Company has delivered to the trustee an officers' certificate and an opinion of
counsel to the effect that the holders of the Senior Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such deposit
and covenant defeasance by the Company and will be subject to federal income tax
on the same amount, in the same manner and at the same times as would have been
the case if such deposit and covenant defeasance had not occurred, (iv) the
Company has delivered to the trustee an opinion of counsel to the effect that
after the 123rd day following the deposit, the trust funds will not be subject
to the effect of any applicable bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally and (v) the Company has
delivered to the trustee an officers' certificate and an opinion of counsel
stating that all conditions related to the covenant defeasance have been
complied with.

(e) Evidence of Compliance

Pursuant to the Indenture, The Company shall deliver to the Trustee, within
120 days after the end of each fiscal year of the Company, an officers'
certificate stating whether or not, to the best knowledge of the signers, the
Company is in compliance (without regard to periods of grace or notice
requirements) with all conditions and covenants under the Indenture, and if the
Company shall not be in compliance, specifying such non-compliance and the
nature and status thereof of which such signer may have knowledge. The Company
shall file with the Trustee written notice of the occurrence of any default or
Event of Default within ten days of its becoming aware of any such default or
Event of Default.


9. Other Obligors.

Not applicable


Contents of Application for Qualification. This application for qualification
comprises -

(a) Pages numbered 1 to 9, consecutively;
(b) The statement of eligibility and qualification of Wachovia
Bank, N.A., as trustee, on Form T-1 under the indenture to be
qualified; and
(c) The following attached as exhibits in addition to those filed as
part of the Form T-1 statement of eligibility and qualification of
the trustee:

Exhibit T3A
(i) Articles of Incorporation of the Registrant, as amended,
effective as of February 4, 1988. (Incorporated herein by
reference to the Company's Amendment No. 1 to the Registration
Statement on Form S-3 (No. 333-10783) filed March 21, 1997.);

(ii) Amendment to the Articles of Incorporation, effective December
29, 1989 (Incorporated herein by reference to the Company's
Amendment No. 1 to the Registration Statement on Form S-3 (No.
333-10783) filed March 21, 1997.);

(iii) Amendment to Articles of Incorporation, effective June 27,
1995 (Incorporated herein by reference to the Company's
Current Report on Form 8-K (File No. 1-9819), dated June 26,
1995.);

(iv) Amendment to Articles of Incorporation, effective October 23,
1995, (Incorporated herein by reference to the Company's
Current Report on Form 8-K (File No. 1-9819), dated October
19, 1995.);

(v) Amendment to the Articles of Incorporation, effective October
9, 1996, (Incorporated herein by reference to the Registrant's
Current Report on Form 8-K, filed October 15, 1996.);

(vi) Amendment to the Articles of Incorporation, effective October
10, 1996, (Incorporated herein by reference to the
Registrant's Current Report on Form 8-K, filed October 15,
1996.);

(vii) Amendment to the Articles of Incorporation, effective October
19, 1992. (Incorporated herein by reference to the Company's
Amendment No. 1 to the Registration Statement on Form S-3 (No.
333-10783) filed March 21, 1997.);

(viii) Amendment to the Articles of Incorporation, effective August
17, 1992. (Incorporated herein by reference to the Company's
Amendment No. 1 to the Registration Statement on Form S-3 (No.
333-10783) filed March 21, 1997.);

(ix) Amendment to Articles of Incorporation, effective April 25,
1997. (Incorporated herein by reference to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1997.);

(x) Amendment to Articles of Incorporation, effective May 5, 1997.
(Incorporated herein by reference to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1997.)

(xi) Amendment to Articles of Incorporation, effective May 19, 1998
(filed herewith).

(xii) Amendment to Articles of Incorporation, effective August 2, 1999
(filed herewith).

Exhibit T3B Amended Bylaws of the Company (Incorporated by reference
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1992, as amended.)

Exhibit T3C Form of Indenture between the Company and Wachovia Bank, N.A., as
Trustee (filed herewith).

Exhibit T3D Not applicable.

Exhibit T3E

(i) Offering Circular, dated January 8, 2002 (filed as an exhibit
to the Company's Schedule TO, filed with the Securities and
Exchange Commission on January 8, 2003 and incorporated by
reference herein).

(ii) Series A Preferred Stock Letter of Transmittal (filed as an
exhibit to the Company's Schedule TO, filed with the
Securities and Exchange Commission on January 8, 2003 and
incorporated by reference herein).

(iii) Series B Preferred Stock Letter of Transmittal (filed as an
exhibit to the Company's Schedule TO, filed with the
Securities and Exchange Commission on January 8, 2003 and
incorporated by reference herein).

(iv) Series C Preferred Stock Letter of Transmittal (filed as an
exhibit to the Company's Schedule TO, filed with the
Securities and Exchange Commission on January 8, 2003 and
incorporated by reference herein).

(v) Notice of Guaranteed Delivery (filed as an exhibit to the
Company's Schedule TO, filed with the Securities and Exchange
Commission on January 8, 2003 and incorporated by reference
herein).

(vi) Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees dated January 8, 2003 (filed as an exhibit
to the Company's Schedule TO, filed with the Securities and
Exchange Commission on January 8, 2003 and incorporated by
reference herein).

(vii) Letter to Clients from Brokers, Dealers, Commercial Banks,
Trust Companies and other Nominees dated January 8, 2003
(filed as an exhibit to the Company's Schedule TO, filed with
the Securities and Exchange Commission on January 8, 2003 and
incorporated by reference herein).


Exhibit T3F Cross Reference Sheet showing the location in the
Indenture of the provisions inserted therein pursuant to
Sections 310 through 318(a), inclusive, of the Act (included
in Exhibit T3C hereof).


SIGNATURE

Pursuant to the requirements of the Trust Indenture Act of 1939, Dynex
Capital, Inc., a corporation organized and existing under the laws of Virginia,
has duly caused this application to be signed on its behalf by the undersigned,
thereunto duly authorized, and its seal to be hereunto affixed and attested, all
in the city of Richmond and State of Virginia, on the 8th day of January, 2003.


(SEAL) DYNEX CAPITAL, INC.




By: /s/Stephen J. Benedetti
---------------------------------
Stephen J. Benedetti
Executive Vice President and
Chief Financial Officer and



Attest: /s/Kathleen A. Fern
------------------------------------


By: Kathleen A. Fern
----------------------------------------
(Name)


Assistant Secretary
----------------------------------------
(Title)