THIS SECURITY IS A GLOBAL  SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER  REFERRED  TO AND IS  REGISTERED  IN THE  NAME OF  CEDE & CO.,  AS A
NOMINEE OF THE  DEPOSITORY  TRUST  COMPANY  ("DTC").  THIS  GLOBAL  SECURITY  IS
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN DTC OR
ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES  HEREINAFTER DESCRIBED AND MAY NOT
BE TRANSFERRED EXCEPT AS A WHOLE BY DTC TO A NOMINEE OF DTC, BY A NOMINEE OF DTC
TO DTC OR ANOTHER NOMINEE OF DTC OR BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR TO
DTC OR A NOMINEE OF SUCH SUCCESSOR TO DTC.

         NEITHER THE HOLDER NOR THE  BENEFICIAL  OWNERS OF THIS GLOBAL  SECURITY
SHALL BE ENTITLED TO RECEIVE  PAYMENT OF INTEREST  HEREON EXCEPT PURSUANT TO THE
PROVISIONS HEREOF.

         Unless this  Security is presented by an authorized  representative  of
The Depository Trust Company, a New York corporation,  to Dynex Capital, Inc. or
its  agent  for  registration  of  transfer,   exchange,  or  payment,  and  any
certificate issued is registered in the name of Cede & Co. or in such other name
as is requested by an authorized  representative of DTC (and any payment is made
to  Cede  & Co.  or to  such  other  entity  as is  requested  by an  authorized
representative  of DTC), ANY TRANSFER,  PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE  BY OR TO ANY PERSON IS  WRONGFUL  inasmuch  as the  registered  owner
hereof, Cede & Co., has an interest herein.




                               DYNEX CAPITAL, INC.

                      7.875% SENIOR NOTE DUE JULY 15, 2002


No. 1                                                      CUSIP No. 26817Q AA 8

         Dynex  Capital,  Inc., a corporation  duly organized and existing under
the laws of the  Commonwealth  of Virginia  (herein called the "Company,"  which
term includes any successor  corporation to the Indenture  hereinafter  referred
to), for value  received,  hereby promises to pay to CEDE & CO., as a nominee of
The Depository Trust Company ("DTC"), or its registered  assigns,  the principal
sum of ONE HUNDRED  MILLION DOLLARS  ($100,000,000)  on July 15, 2002 and to pay
interest  thereon  semi-annually  in  arrears  on January 15 and July 15 in each
year,  commencing  January 15, 1998, and at Maturity (each, an "Interest Payment
Date") at the rate of 7.875%  per annum  until the  principal  hereof is paid or
made  available for payment.  This Global  Security shall bear interest from the
most recent  Interest  Payment Date to which interest in respect hereof has been





                                                                               2

paid,  unless no interest has been paid on this Global  Security,  in which case
from July 15, 1997. Any payment of principal or interest that is due and payable
shall accrue  interest,  to the extent lawful,  at the rate borne by this Global
Security  from the day  after the date on which  such  payment  becomes  due and
payable to the date payment has been made, compounded on a semi-annual basis.

         The interest so payable,  and punctually  paid or duly provided for, on
any Interest Payment Date will,  subject to certain  exceptions  provided in the
Indenture referred to on the reverse hereof, be paid to the Person in whose name
this Global  Security is registered on the Security  Register for the Securities
at the close of business on the Regular Record Date  immediately  preceding such
Interest  Payment  Date.  The Regular  Record Date with  respect to any Interest
Payment  Date  will be  January  1 or July 1, as the  case  may be,  immediately
preceding such Interest  Payment Date.  Interest on this Global Security will be
computed on the basis of a 360-day year consisting of twelve 30-day months.

         If any Interest  Payment Date or the Maturity  Date falls on a day that
is not a Business  Day, the required  payment shall be made on the next Business
Day as if it were made on the date such  payment was due and no  interest  shall
accrue on the amount so  payable  for the  period  from and after such  Interest
Payment  Date or the  Maturity  Date,  as the case may be and as provided in the
Indenture.

         Payment of the principal,  interest and Make-Whole  Amounts, if any, on
this Global  Security will be made at the corporate trust office of the Trustee,
which as of July 21, 1997, is located at 600 Travis Street, 8th Floor,  Houston,
Texas  77002,  or, at the option of the Holder,  at the office of the Trustee in
The City of New  York,  which  as of July 21,  1997,  is  Texas  Commerce  Trust
Company,  55 Water Street,  North  Building,  Room 234, Window 20, New York, New
York 10041,  in such coin or currency of the United  States of America as at the
time of payment is legal tender for payment of public and private debts.

         The indebtedness  represented by this Global Security is, to the extent
provided in the Indenture,  senior,  unsecured  indebtedness  of the Company and
ranks prior to all subordinated  indebtedness of the Company and pari passu with
all other unsecured indebtedness of the Company outstanding on July 21, 1997.

         Reference  is hereby  made to the  further  provisions  of this  Global
Security set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.

         Unless the  certificate of  authentication  hereon has been executed by
the Trustee referred to on the reverse hereof by manual  signature,  this Global





                                                                               3

Security shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.


         IN WITNESS  WHEREOF,  Company  has caused  this  instrument  to be duly
executed under its corporate seal.

Dated:  July 21, 1997


                                       DYNEX CAPITAL, INC.


                                       By: ______________________________
                                             Name:
                                             Title:

Attest:

__________________________





                  TRUSTEE'S CERTIFICATE OF AUTHENTICATION



                  This is one of the Securities of the series  designated herein
and referred to in the within-mentioned Indenture.



                                       TEXAS COMMERCE BANK NATIONAL
                                        BANK ASSOCIATION, as Trustee



                                       By: ______________________________
                                           Authorized Signatory


Date:  July 21, 1997





                              [REVERSE OF SECURITY]

                               DYNEX CAPITAL, INC.

         1. Indenture. This Global Security is one of a duly authorized issue of
securities of the Company  (herein  called the  "Securities"),  issued and to be
issued in one or more series under an Indenture,  dated as of July 14, 1997 (the
"Indenture"),  by and  between  the Company  and Texas  Commerce  Bank  National
Association,  as trustee  (herein  called the "Trustee"  which term includes any
successor  trustee  under the  Indenture).  The terms of the  Senior  Securities
include  those stated in the Indenture and those made a part of the Indenture by
reference to the Trust  Indenture Act of 1939 (15 U.S. Code ss.ss.  77aaa-77bbb)
as in  effect on the date of the  Indenture.  Reference  is  hereby  made to the
Indenture and all indentures supplemental thereto and to the Trust Indenture Act
for a statement of the respective  rights,  limitations of rights,  obligations,
duties and immunities  thereunder of the Company, the Trustee and the Holders of
the Securities  and of the terms upon which the  Securities  are, and are to be,
authenticated  and  delivered.  All terms used in this Global  Security  and not
otherwise  defined  herein  which are  defined in the  Indenture  shall have the
meanings assigned to them in the Indenture.

         This Global Security is one of the series designated on the face hereof
limited (except as provided in the Indenture) in aggregate  principal  amount to
$100,000,000 (herein called the "Senior Securities").

         No reference  herein to the  Indenture  and no provision of this Global
Security  or of the  Indenture  shall  alter or  impair  the  obligation  of the
Company,  which is  absolute  and  unconditional,  to pay the  principal  of and
interest,  if any, on this Global Security at the times, place and rate, if any,
and in the coin or currency, herein prescribed.

         2. Redemption. The Senior Securities may be redeemed at any time at the
option of the  Company,  in whole or from time to time in part,  at a redemption
price payable in U.S.  dollars equal to the sum of: (i) the principal  amount of
the Senior  Securities  being  redeemed  plus  accrued  interest  thereon to the
redemption  date; and (ii) the Make-Whole  Amount (as defined in the Indenture),
if any, with respect to such Senior Securities (the "Redemption Price").

         If notice of redemption has been given as provided in the Indenture and
funds for the redemption of any Senior  Securities  called for redemption  shall
have been made available on the redemption date referred to in such notice, such
Senior  Securities  will  cease  to bear  interest  on the date  fixed  for such
redemption  specified  in such  notice and the only right of the Holders of such
Senior  Securities from and after the redemption date will be to receive payment





                                                                               2

of the Redemption  Price upon surrender of such Senior  Securities in accordance
with such notice.  Notice of any optional  redemption  of any Senior  Securities
will be given to Holders at their addresses,  as shown in the Security  Register
for the Senior  Securities,  not more than 60 nor less than 30 days prior to the
date fixed for redemption as defined in the Indenture.  The notice of redemption
will specify,  among other items,  the Redemption  Price and principal amount of
the Senior  Securities held by such Holder to be redeemed.  If less than all the
Senior  Securities are to be redeemed at the option of the Company,  the Company
will  notify the Trustee at least 60 days prior to giving  notice of  redemption
(or such shorter period as may be  satisfactory to the Trustee) of the aggregate
principal amount of Senior  Securities to be redeemed and their redemption date.
The Trustee shall select,  in such manner as it shall deem fair and appropriate,
the Senior Securities to be redeemed in whole or in part.

         In the event of redemption of any Senior Securities in part only, a new
Senior Security or Securities  shall be issued in the name of the Holder thereof
in  principal  amount  equivalent  to the  unredeemed  portion of the  partially
redeemed Senior  Security,  and the Senior Security to be redeemed in part shall
be cancelled.

         3. Repurchase at Option of Holders Upon a Change of Control  Triggering
Event.  In accordance  with the procedures set forth in the Indenture,  upon the
occurrence  of  a  Change  of  Control  Triggering  Event  (as  defined  in  the
Indenture),  each  Holder of Senior  Securities  will  have the  right,  at such
Holder's  option,  to require the  Company to  repurchase  all of such  Holder's
Senior  Securities,  or any  portion  thereof  that is an  integral  multiple of
$1,000,  for cash at a repurchase price equal to 101% of the principal amount of
the Senior  Securities to be repurchased,  together with accrued interest to the
repurchase date.

         4. Satisfaction and Discharge.  The Indenture  contains  provisions for
the  satisfaction  and  discharge  of the  entire  indebtedness  of  the  Senior
Securities upon  compliance by the Company with certain  conditions set forth in
the Indenture.

         5. Defeasance.  The Indenture contains provisions for defeasance at any
time of (a) the entire  indebtedness of the Company under the Senior  Securities
and (b)  certain  restrictive  covenants  and  related  defaults  and  Events of
Default, in each case upon compliance by the Company with certain conditions set
forth in the Indenture.




                                                                               3

         6.  Defaults and  Remedies.  If an Event of Default with respect to the
Senior Securities shall occur and be continuing, then the Trustee or the Holders
of not less than 25% in the aggregate principal amount of the outstanding Senior
Securities  may declare the principal of the Senior  Securities  and the accrued
interest  thereon,  if any,  to be due and  payable  in the  manner and with the
effect provided in the Indenture.

         7.  Amendments  and  Waivers.  The  Indenture  permits,   with  certain
exceptions as therein provided,  the amendment or supplementing  thereof and the
modification  of the rights and obligations of the Company and the rights of the
Holders of the Senior Securities at any time by the Company and the Trustee with
the consent of the Holders of not less than a majority  in  principal  amount of
all  outstanding   Securities   affected  by  such   amendment,   supplement  or
modification.  The Indenture also contains provisions  permitting the Holders of
specified percentages in principal amount of the Senior Securities  outstanding,
on behalf of the Holders of all the Senior  Securities,  to waive  compliance by
the Company with certain  provisions  of the Indenture and certain past defaults
under the Indenture and the consequences of any such defaults.  Any such consent
or waiver shall be  conclusive  and binding upon the Holders and upon all future
Holders of this  Global  Security  and of any Senior  Security  issued  upon the
registration  of  transfer  hereof or in  exchange  herefor  or in lieu  hereof,
whether  or not  notation  of such  consent  or waiver is made upon this  Global
Security.

         8.  Denominations,  Transfer and Exchange.  The Senior  Securities  are
issuable only in registered form without coupons in  denominations of $1,000 and
any integral  multiple  thereof (except for Senior  Securities  issued in global
form, which may be of any denomination).

         This Global  Security  shall be  exchangeable  only as provided in this
paragraph  and as  provided  in  the  Indenture.  This  Global  Security  may be
transferred, in whole but not in part, only to a nominee of DTC, or by a nominee
of DTC to DTC, or to a successor  to DTC for this  Global  Security  selected or
approved by the Company or to a nominee of such  successor  to DTC.  This Global
Security shall be exchangeable for Senior Securities  registered in the names of
Persons other than DTC or its nominee if (x) DTC notifies the Company that it is
unwilling or unable to continue as  depositary  for the Senior  Securities or at
any time ceases to be a clearing agency  registered as such under the Securities
Exchange Act of 1934, as amended,  and the successor  depositary for such series
is not appointed by the Company within 90 days after the Company receives notice
or becomes aware of such  unwillingness,  inability or ineligibility,  (y) there
shall have  occurred and be  continuing  an Event of Default and the  beneficial
owners  representing  a majority in  principal  amount of the Senior





                                                                               4

Securities  represented  by this Global  Security  advise DTC to cease acting as
depositary  for  such  Senior  Securities,  or (z)  the  Company,  in  its  sole
discretion,  notifies DTC in writing at any time that all Senior Securities (but
not less than  all)  shall no longer be  represented  by this  Global  Security.
Senior Securities so issued in exchange for this Global Security shall be of the
same series, having the same terms as this Global Security, and in the aggregate
have the same principal  amount as this Global  Security and shall be registered
in such names as DTC shall direct.

         As provided in the  Indenture  and subject to certain  limitations  set
forth therein,  every Senior Security  presented or surrendered for registration
of transfer or for exchange or  redemption  shall (if so required by the Company
or the  Security  Registrar)  be duly  endorsed,  or  accompanied  by a  written
instrument  of transfer  in form  satisfactory  to the Company and the  Security
Registrar,  duly executed by the Holder thereof or his attorney duly  authorized
in writing,  and thereupon one or more new Senior Securities,  of any authorized
denominations and of a like aggregate principal amount, and containing identical
terms and provisions as such Senior  Security,  will be issued to the designated
transferee or transferees.

         No service charge shall be made for any such  registration of transfer,
but the  Company  may require  payment of a sum  sufficient  to cover any tax or
other governmental  charge payable in connection  therewith,  as provided in and
subject to the limitations set forth in the Indenture.

         9.  Persons  Deemed  Owners.  Prior to due  presentment  of any  Senior
Security for registration of transfer, the Company, the Trustee and any agent of
the  Company  or the  Trustee  may treat the  Person in whose  name such  Senior
Security is registered  as the owner  thereof for all  purposes,  whether or not
such Senior  Security be overdue,  and neither the Company,  the Trustee nor any
such agent shall be affected by notice to the contrary.

         10. No Recourse Against Others.  No recourse shall be had,  directly or
indirectly,  for the payment of the principal or interest, if any, on the Senior
Securities,  or for any claim  based  thereon,  or  otherwise  in respect of any
Senior  Security,  or based on or in respect of the  Indenture or any  indenture
supplemental thereto, against any incorporator,  or against any past, present or
future stockholder, director or officer, as such, of the Company or the Trustee,
or of any  successor  of the  Company or the  Trustee,  whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise, all such liability being expressly waived and released.





                                                                               5

         11.  GOVERNING  LAW.  THIS  GLOBAL  SECURITY  SHALL BE  GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.