Dynex Capital, Inc. Responds to Moody's Rating Action.

GLEN ALLEN, Va.--(BUSINESS WIRE)--Oct. 8, 1998--Dynex Capital, Inc. (NYSE: DX) responded today to Moody's Investors Service lowering of its rating on Dynex's long-term senior unsecured debt and cumulative preferred stock.

Thomas H. Potts, President, stated "Moody's has announced a lowering of the ratings as a result of the impact on Dynex of the recent disruptions in the capital markets, weak demand and volatility in the commercial mortgage securitization market. Moody's also indicated that Dynex's use of leverage limits the Company's options for reacting to adverse market conditions. While we agree that the recent disruption in the capital markets has impacted Dynex, we disagree with the action taken by Moody's. We believe that Moody's has overreacted to the impact such conditions have on Dynex's financial position. The majority of Dynex's investment portfolio is financed with long-term, non-recourse collateralized bond obligations, which are not subject to margin calls. Dynex funds its assets held for securitization with committed lines of credit, the earliest of which expires in April 1999. Dynex has no borrowings against any investment in its portfolio that is below investment grade. Dynex continues to maintain a recourse debt-to-equity ratio of less than 3 to 1."

Mr. Potts further commented, "We have taken and will continue to take steps to improve our financial position and will prudently manage the Company's capital position under these difficult market conditions."

Dynex Capital, Inc. is a financial services company that elects to be treated as a real estate investment trust. The Company's primary loan production operations include the origination of mortgage loans secured by multifamily and commercial real estate properties and the origination of loans secured by manufactured homes. The Company's strategy is to create investments for its portfolio from its production operations at a lower effective cost than if assets were purchased in the market, and as a result, steadily increase its net interest margin income and earnings per share over time. Note: This document contains "forward-looking statements" (within the meaning of the Private Securities Litigation Act of 1995) that inherently involve risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of unforeseen external factors. As discussed in the Company's filings with the SEC, these factors may include, but are not limited to, changes in general economic conditions, fluctuations in interest rates, increases in costs and other general competitive factors.