EXHIBIT L


[CALIFORNIA INVESTMENT FUND, LLC LETTERHEAD]

Dynex Capital, Inc.
Attn: Thomas H. Potts
10900 Nuckols Road, 3rd Floor
Glen Allen, Virginia 23060
804-217-5861

Dynex Capital, Inc.
C/O Investment Banking Division
Paine Webber Incorporated
Attn: Mr. Jim Murray
1285 Avenue of the Americas

New York, NY 10019
212-713-4205

VIA FACSIMILE

July 24, 2000

Dear Mr. Potts and Mr. Murray:

California Investment Fund, LLC (CIF) is in receipt of your
letter dated July 6, 2000. Please find the attached response to your
counter-offer to our Revised Letter of Intent. In summary, the following
points have been changed from the terms you presented.

1. The purchase price has been increased from our original offer, to
$90 million. Our offer includes all accrued, unpaid dividends
within the $90 million, with no further accruals to be paid. The
specific allocation per equity class is based on a pro rata
distribution of the purchase price based on the closing prices and
their relative percentages of total market capitalization on July
10, 2000. This price represents a premium of 91.93% of the closing
price of each class of securities on July 29, 2000.

After numerous calls with Jon Dever of Paine Webber, he was
successful in convincing us that the asset values currently being
reported by the company are conservative. Through our many
conversations, Jon has consistently focused on the long-term value
of the company. By working closely with Paine Webber, the Andrew
Davidson Company, and our lenders, we have revised our pricing from
the July 12, 2000 letter based on our recently received preliminary
valuation reports. We have reviewed each asset thoroughly to
attempt to reach your targeted sale price of $100 million, however
by reviewing all of the data we currently have available we have
been able to stretch our pricing to reach $90 million.

2. The stock of Dynex Holdings, Inc., will be under option to purchase
at $200,000, pending due diligence review of its assets.

3. An acceptable discount of the Senior Notes must be verified by CIF
prior to entering the definitive agreement. Verification by direct
contact with note holders will be required. Any discount negotiated
by CIF will inure to the benefit of the successor entity.

4. The deposit shall serve as liquidated damages, with no further
remedies in order to be reciprocal to the Break-up Fee as
liquidated damages with no further remedies.

5. Paragraph 11 has been changed to have the deposit placed in escrow
upon execution of the Letter of Intent.

6. Paragraph 13 has been added to reflect CIF's interest in pursuing
the assumption of the liability for the Chase Bank of Texas Letter
of credit, maturing July 31, 2000.

If these changes meet with your approval, please sign the attached Letter
of Intent and return. We are prepare to move forward with final due
diligence immediately upon your acceptance

California Investment Fund, L.L.C.


By: /s/ Michael R. Kelly
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Name: Michael R. Kelly
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Title: Managing Member
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