OPINION OF LEGAL COUNSEL

Exhibit 5.1


Venable, Baetjer and Howard, LLP
1800 Mercantile Bank & Trust Building
Two Hopkins Plaza
Baltimore, Maryland 21201-2978


July 25, 1997


Dynex Capital, Inc.
10900 Nuckols Road
Glen Allen, Virginia 23060

Re: Registration Statement on Form S-8

Ladies and Gentlemen:

We have acted as counsel to Dynex Capital, Inc., a Virginia
corporation (the "Company"), in connection with a registration statement on Form
S-8 filed with the Securities and Exchange Commission (the "Registration
Statement") pertaining to the registration of up to 2,400,000 shares of its
Common Stock, $0.01 par value (the "Common Stock"), for issuance and sale
pursuant to the Company's 1992 Stock Incentive Plan, as amended (the "Plan").

In that connection, we have examined originals or copies of such
documents, corporate records and other instruments as we have deemed necessary
or appropriate for purposes of this opinion including, but not limited to, the
following: (i) the Registration Statement; (ii) the Articles of Incorporation
and the Bylaws of the Company, as amended and as currently in effect; (iii) the
Plan; (iv) certain resolutions of the Board of Directors of the Corporation
relating to the issuance of the Common Stock and the other transactions
contemplated by the Registration Statement; and (v) such other documents as we
have deemed necessary or appropriate as a basis for the opinion set forth below.
We have assumed, without independent verification, the genuineness of
signatures, the authenticity of documents and the conformity with originals of
copies.

Based on the foregoing, we are of the opinion that the Common Stock,
when issued and sold in accordance with the terms of the Plan, will be validly
issued, fully paid and non-assessable.

We are members of the Bar of the Commonwealth of Virginia and the
opinions expressed herein are limited to the corporate laws of Virginia
pertaining to matters such as the issuance of stock, but not including the
"securities" or "blue sky" law of the Commonwealth.





We hereby consent to the use of this opinion as an exhibit to the
Registration Statement. By giving the foregoing consent, we do not admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933.

Very truly yours,

VENABLE, BAETJER AND HOWARD, LLP