EXHIBIT 5.1

July 14, 1997



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

Re: Registration Statement on Form S-3
(Reg. No. 333-10783)
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Ladies and Gentlemen:


We have acted as counsel to Dynex Capital, Inc., a Virginia corporation
(the "Company"), in connection with its proposed public offering of $100,000,000
aggregate principal amount of Notes pursuant to a Registration Statement filed
on Form S-3 (Registration No. 333-10783) ("Registration Statement"). On July 14,
1997 the Company filed a Prospectus and a Prospectus Supplement thereto (the
"Prospectus") with the Securities and Exchange Commission with respect to the
offer and sale of the Notes.

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 the Articles of
Incorporation, as amended, Bylaws of the Company, the Indenture governing the
Notes and the proposed Board of Directors resolutions which establish the terms
of the Notes. 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 Notes being sold
by the Company, when issued and sold in accordance with the terms of the
Underwriting Agreement in substantially the same form filed as Exhibit 1.1 to
the Form 8-K filed by the Company with Securities and Exchange Commission in
connection with the offer and sale of the Notes (the "Form 8-K"), will be
binding obligations of the Company.



Dynex Capital, Inc.

July 14, 1997
Page 2


We are members of the Bars of the State of Maryland and the
Commonwealth of Virginia and the opinions expressed herein are limited to the
corporate laws of such States pertaining to such matters as the issuance of
securities and the incurrence of indebtedness, but not including the
"securities" or "Blue Sky" laws of such States.

You may rely on this opinion in connection with the sale of the Notes
pursuant to the Registration Statement and Prospectus. No other person may rely
on this opinion without our prior written consent.

We hereby consent to the use of this opinion as an exhibit to the Form
8-K and incorporation by reference thereof into the Registration Statement and
to the reference to our firm under "Legal Opinions" in the Prospectus and "Legal
Matters" in the Preliminary Prospectus Supplement" comprising a part of 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