UNITED STATES
            SECURITIES AND EXCHANGE COMMISSION
                  Washington, D.C. 20549

                         FORM 10-Q

|X|      Quarterly Report Pursuant to Section 13 or 15(d) of
         the Securities Exchange Act of 1934

                                For the quarter ended September 30, 2000

|_|      Transition Report Pursuant to Section 13 or 15(d) of
                  the Securities Exchange Act of 1934

                       Commission file number 33-83524


                        MERIT SECURITIES CORPORATION
           (Exact name of registrant as specified in its charter)

                    Virginia                                54-1736551
(State or other jurisdiction of incorporation)(I.R.S.Employer Identification No)

     4551 Cox Road, Suite 300, Glen Allen, Virginia        23060
     (Address of principal executive offices)             (Zip Code)

                       (804) 217-5800
    (Registrant's telephone number, including area code)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past ninety days. |X| Yes |_| No

     As of October  31,  2000,  the latest  practicable  date,  there were 1,000
shares of Merit Securities Corporation common stock outstanding.

     The registrant  meets the  conditions  set forth in General  Instructions H
(1)(a)  and (b) of Form  10-Q and is  therefore  filing  this Form 10-Q with the
reduced disclosure format.



                      MERIT SECURITIES CORPORATION
                                FORM 10-Q
                                  INDEX


                                                                     Page Number
PART I.   FINANCIAL INFORMATION

Item 1.   Financial Statements
              Balance Sheets at September 30, 2000 and
              December 31, 1999                                               3

              Statements of Operations for the three and nine months
              ended September 30, 2000 and 1999                               4

              Statement of Shareholder's Equity for the nine months
              ended September 30, 2000                                        5

              Statements of Cash Flows for the nine months ended
              September 30, 2000 and 1999                                     6

              Notes to Unaudited Financial Statements                         7

Item 2.   Management's Discussion and Analysis of
              Financial Condition and Results of Operations                   8

Item 3.   Quantitative and Qualitative Disclosures about Market Risk          10

PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings                                                   12

Item 5.   Other Information                                                   12

Item 6.   Exhibits and Reports on Form 8-K                                    12

SIGNATURES                                                                    15


PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements
<TABLE>
<CAPTION>

MERIT SECURITIES CORPORATION
Balance Sheets
(amounts in thousands except share data)
<S>                                                                        <C>                  <C>

                                                                       September 30,         December 31,
                                                                          2000                   1999
                                                                    ------------------     ------------------
ASSETS:
   Collateral for collateralized bonds                               $    2,365,239         $    2,839,324
   Prepaid shelf registration fees                                                -                     94
   Cash                                                                          10                     10
                                                                    -----------------      -----------------
                                                                     $    2,365,249         $    2,839,428
                                                                    =================      =================

LIABILITIES AND SHAREHOLDER'S EQUITY

LIABILITIES:
   Non-recourse debt - collateralized bonds                          $    2,279,317         $    2,661,069
   Due to affiliates, net                                                         -                 42,344
                                                                    -----------------      -----------------
                                                                          2,279,317              2,703,413
                                                                    -----------------      -----------------

SHAREHOLDER'S EQUITY:
   Common stock, no par value,
       10,000 shares authorized, 1,000 shares issued and                         10                     10
outstanding
   Additional paid-in capital                                               151,262                125,997
   Accumulated other comprehensive loss                                     (89,697)               (14,749)
   Retained earnings                                                         24,357                 24,757
                                                                                              --------------
                                                                    -----------------      ---
                                                                             85,932                136,015
                                                                    -----------------      -----------------
                                                                     $    2,365,249         $    2,839,428
                                                                    =================      =================
<FN>
See notes to unaudited financial statements.
</FN>
</TABLE>




<TABLE>
<CAPTION>

MERIT SECURITIES CORPORATION
Statements of Operations
(amounts in thousands except share data)
<S>                                                  <C>             <C>           <C>            <C>

                                                      Three Months Ended              Nine Months Ended
                                                         September 30,                  September 30,
                                                  ----------------------------   ----------------------------
                                                                                 ----------------------------
                                                     2000            1999            2000           1999
                                                  ------------   -------------   -------------   ------------

Interest income:
    Collateral for collateralized bonds          $   49,254     $    51,225      $   154,013     $  155,501
                                                 -------------  --------------  --------------  -------------
                                                                                --------------  -------------

Interest and related expense:
    Interest expense on collateralized bonds         43,419          42,232          134,379        129,812
    Other collateralized bond expense                   413             590            1,217          1,513
                                                                                --------------  -------------
                                                 -------------  --------------  --------------  -------------
                                                     43,832          42,822          135,596        131,325
                                                 -------------  --------------  --------------  -------------
                                                                                --------------  -------------

Net interest margin before provision for losses       5,422           8,403           18,417         24,176
Provision for losses                                 (5,032)         (3,138)        (15,812)         (7,704)
                                                                                --------------  -------------
                                                 -------------  --------------  --------------  -------------
Net interest margin                                     390           5,265            2,605         16,472

Loss on termination of interest rate caps                 -               -          (2,440)              -
Gain on sale of investments                               -               -                -            397
Other expense                                             -               -             (94)              -
Interest on due to affiliates, net                        -            (631)           (471)           (966)
                                                                                --------------  -------------
                                                 -------------  --------------  --------------  -------------
Income (loss) before extraordinary item                 390           4,634            (400)         15,903
Extraordinary gain - extinguishment of debt               -               -               -          27,842
                                                 -------------  --------------  --------------  -------------
                                                                                --------------  -------------
Net income (loss)                                $      390           4,634      $     (400)     $   43,745

<FN>
See notes to unaudited financial statements.
</FN>
</TABLE>


<TABLE>
<CAPTION>
MERIT SECURITIES CORPORATION
Statement of Shareholder's Equity
(amounts in thousands except share data)
<S>                                     <C>             <C>             <C>             <C>             <C>


                                                                Accumulated other
                                                   Additional   comprehensive loss
                                    Common stock     paid-in                           Retained
                                                     capital                           earnings          Total
                                    ------------- --------------------------------- --------------- ----------------

Balance at December 31, 1999          $    10    $      125,997 $          (14,749)  $      24,757 $       136,015

Comprehensive loss:
   Net loss                                 -                 -                   -          (400)           (400)

   Change in net unrealized loss on
      investments available-for-sale        -                 -            (74,948)              -        (74,948)
                                    ------------ -------------- ------------------- -------------- ----------------
Total comprehensive loss                    -                 -            (74,948)          (400)        (75,348)

Capital contribution                        -            25,265                   -              -          25,265
                                    ------------ -------------- ------------------- -------------- ----------------

Balance at September 30, 2000         $    10    $      151,262 $          (89,697)  $      24,357 $        85,932
                                    ============ ============== =================== ============== ================

<FN>
See notes to unaudited financial statements.
</FN>
</TABLE>

<TABLE>
<CAPTION>
MERIT SECURITIES CORPORATION
Statements of Cash Flows
(amounts in thousands)
<S>                                                               <C>                           <C>
                                                                              Nine Months Ended
                                                                                September 30,
                                                                        2000                     1999
                                                                 -------------------      -------------------

Operating activities:
  Net (loss) income                                              $   (400)                 $   43,745
  Adjustments to reconcile net (loss) income to net cash
   provided by operating activities:
    Loss on termination of interest rate caps                        2,440                     -
    Gain on sale of investments                                      -                         (397)
    Provision for losses                                             15,812                    7,704
    Extraordinary gain - extinguishment of debt                      -                              (27,842)
    Amortization, net                                                7,729                     13,616
    Other                                                                     (26)             (130)
                                                                 -------------------      -------------------
      Net cash provided by operating activities                            25,555              36,696
                                                                 -------------------      -------------------

Investing activities:
  Collateral for collateralized bonds:
    Purchase of loans subsequently securitized                       -                         (628,584)
    Principal payments on collateral                                 375,313                   939,933
    Proceeds from sale of collateralized bonds                       -                         5,250
    Net decrease in accrued interest receivable and
    funds held by trustee                                            1,614                     1,473
                                                                 -------------------
                                                                                          -------------------
      Net cash provided by investing activities                      376,927                   318,072
                                                                 -------------------      -------------------

Financing activities:
  Collateralized bonds:
   Proceeds from issuance of collateralized bonds                             657              589,904
   Principal payments on collateralized bonds                            (385,822)             (935,070)
   (Decrease) increase in accrued interest payable                           (238)             20
   (Decrease) increase in due to affiliates                               (42,344)             47,293
 Capital contributions (distributions)                                     25,265              (56,915)
                                                                 -------------------      -------------------
      Net cash used for financing activities                             (402,482)             (354,768)
                                                                 -------------------      -------------------

Cash at beginning of period                                                    10              10
                                                                    ----------------          ---------------
                                                                 ----                     -----

Cash at end of period                                            $             10          $   10
                                                                 ===================      ===================

Supplemental disclosure of cash flow information:
  Cash paid for interest                                         $        131,788          $        129,067
                                                                 ===================      ===================

  Collateral for collateralized bonds subsequently securitized   $              -          $   1,221,456
                                                                 ===================      ===================

<FN>
See notes to unaudited financial statements.
</FN>
</TABLE>


MERIT SECURITIES CORPORATION
Notes to Unaudited Financial Statements
September 30, 2000
(amounts in thousands except share data)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The accompanying  consolidated  financial  statements have been prepared in
accordance  with the  instructions  to Form 10-Q and do not  include  all of the
information and notes required by generally accepted  accounting  principles for
complete financial statements.  The financial statements include the accounts of
Merit Securities  Corporation  (the  "Company").  The Company is a wholly-owned,
limited-purpose  finance subsidiary of Issuer Holding Corporation  ("IHC").  IHC
was formed on September 4, 1996 to acquire all of the  outstanding  stock of the
Company and certain other affiliates of Dynex Capital, Inc. ("Dynex").  IHC is a
wholly-owned  subsidiary of Dynex.  The Company was organized to facilitate  the
securitization  of loans through the issuance and sale of  collateralized  bonds
(the "Bonds").

     In the opinion of  management,  all  material  adjustments,  consisting  of
normal recurring  adjustments,  considered  necessary for a fair presentation of
the financial statements have been included.  The Balance Sheet at September 30,
2000, the Statements of Operations for the three and nine months ended September
30, 2000 and 1999,  the  Statement of  Shareholder's  Equity for the nine months
ended September 30, 2000, the Statements of Cash Flows for the nine months ended
September 30, 2000 and 1999,  and the related notes to financial  statements are
unaudited.  Operating  results for the nine months ended  September 30, 2000 are
not  necessarily  indicative  of the results  that may be expected  for the year
ending  December  31,  2000.  For  further  information,  refer  to the  audited
financial  statements and footnotes  included in the Company's Form 10-K for the
year ended December 31, 1999.

     Certain  amounts  for  1999  have  been  reclassified  to  conform  to  the
presentation for 2000.

NOTE 2--COLLATERAL FOR COLLATERALIZED BONDS

     Pursuant to the requirements of Statement of Financial Accounting Standards
No. 115, Accounting for Certain  Investments in Debt and Equity Securities,  the
Company   has    classified    collateral    for    collateralized    bonds   as
available-for-sale.  The following table summarizes the Company's amortized cost
basis and fair value of  collateral  for  collateralized  bonds at September 30,
2000 and December 31, 1999,  and the related  average  effective  interest rates
(calculated  for the month ended  September 30, 2000 and December 31, 1999,  and
excluding unrealized gains and losses):
<TABLE>
<CAPTION>
<S>                                             <C>              <C>                    <C>             <C>

-------------------------------------------------------------------------------------------------------------------
                                                    September 30, 2000                  December 31, 1999
-------------------------------------------------------------------------------------------------------------------
                                                                  Effective                          Effective
                                              Fair Value        Interest Rate      Fair Value      Interest Rate
-------------------------------------------------------------------------------------------------------------------

Collateral for collateralized bonds:
   Amortized cost                         $      2,466,025          7.8%       $      2,865,903         7.5%
   Allowance for losses                            (11,089)                             (11,830)
-------------------------------------------------------------------------------------------------------------------
      Amortized cost, net                        2,454,936                            2,854,073
   Gross unrealized gains                           15,788                               17,124
   Gross unrealized losses                        (105,485)                             (31,873)
-------------------------------------------------------------------------------------------------------------------
                                          $      2,365,239                     $      2,839,324
-------------------------------------------------------------------------------------------------------------------
</TABLE>

     Collateral  for  collateralized  bonds consists of debt  securities  backed
primarily by  adjustable-rate  and  fixed-rate  mortgage  loans secured by first
liens on single family residential  housing,  manufactured  housing  installment
loans  secured by either a UCC filing or a motor  vehicle title and property tax
receivables.  All  collateral  for  collateralized  bonds is  pledged  to secure
repayment of the related  collateralized bonds. All principal and interest (less
servicing-related  fees) on the  collateral  is  remitted  to a  trustee  and is
available for payment on the  collateralized  bonds.  The Company's  exposure to
loss on collateral for  collateralized  bonds is generally limited to the amount
of collateral pledged in excess of the related  collateralized  bonds issued, as
the collateralized  bonds issued are non-recourse to the Company. The collateral
for  collateralized  bonds can be sold by the  Company,  but only subject to the
lien of the collateralized bond indenture.

     The Company did not securitize any collateral  during the nine months ended
September 30, 2000.

NOTE 3 - USE OF ESTIMATES

     The  Company  uses  estimates  in  establishing  the  fair  value  for  its
collateral for collateralized bonds.  Estimates of fair value for collateral for
collateralized  bonds are  determined  by  calculating  the present value of the
projected cash flows of the instruments,  using discount rates, prepayment rates
and credit loss assumptions established by management. The discount rate used in
the determination of fair value of the collateral for  collateralized  bonds was
16% at September 30, 2000.  Prepayment  rate  assumptions  at September 30, 2000
were  generally  at a "constant  prepayment  rate" or CPR of 28% for  securities
secured by single family  mortgage loan  collateral,  and a CPR equivalent of 7%
for  securities  secured  by  manufactured  housing  loan  collateral.  The loss
assumptions utilized vary for each series of collateral of collateralized bonds,
depending  on the  collateral  pledged.  The cash flows for the  collateral  for
collateralized  bonds were projected to the estimated date that the security can
be called and retired,  which is typically triggered when the remaining security
balance equals 35% of the original balance.

     Variations  in market  discount  rates,  prepayment  rates and credit  loss
assumptions  may  materially  impact the resulting  fair values of the Company's
collateral  for  collateralized  bonds.  Since the fair  value of the  Company's
collateral  for  collateralized  bonds is based on  estimates,  actual gains and
losses  recognized  may differ from those  estimates  recorded in the  financial
statements.

     Item 2.  Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations

     The Company was organized to facilitate the securitization of loans through
the issuance and sale of collateralized  bonds (the "Bonds").  The Bonds will be
secured  primarily  by: (i) mortgage  loans  secured by first or second liens on
residential property, (ii) Federal National Mortgage Association Mortgage-Backed
Certificates,  (iii)  Federal  Home Loan  Mortgage  Corporation  Mortgage-Backed
Certificates,  (iv) Government  National  Mortgage  Association  Mortgage-Backed
Certificates,     (v)    other    mortgage    pass-through    certificates    or
mortgage-collateralized  obligations,  (vi) property tax  receivables  and (vii)
consumer installment loans (collectively,  the "Collateral"). In the future, the
Company may also securitize other types of loans.

     After  payment of the  expenses of an offering  and certain  administrative
expenses,  the net  proceeds  from an offering of Bonds will be used to purchase
Collateral  from IHC or various  third  parties.  IHC can be expected to use the
proceeds  to reduce  indebtedness  incurred  to obtain  such loans or to acquire
additional Collateral.  After the issuance of a series of Bonds, the Company may
sell the  Collateral  securing that series of Bonds,  subject to the lien of the
Bonds.

                                               FINANCIAL CONDITION

---------------------------------------------- ------------------ --------------
                                                 September 30,     December 31,
(amounts in thousands except per share data)         2000              1999
---------------------------------------------- ------------------ --------------

Collateral for collateralized bonds             $   2,365,239     $   2,839,324
Non-recourse debt - collateralized bonds            2,279,317         2,661,069
Shareholder's equity                                   85,932           136,015

Collateralized bond series outstanding                      4                 4

---------------------------------------------- ------------------ --------------

     Collateral  for  collateralized  bonds As of both  September  30,  2000 and
December 31, 1999, the Company had 4 series of collateralized bonds outstanding.
The collateral for  collateralized  bonds decreased to $2.4 billion at September
30, 2000  compared to $2.8 billion at December 31, 1999.  This  decrease of $0.4
billion is primarily the result of $375.3 million in paydowns on the collateral.

     Non-recourse debt - collateralized  bonds Collateralized bonds decreased to
$2.3 billion at  September  30, 2000 from $2.7 billion at December 31, 1999 as a
result of $385.8 million in paydowns  during the nine months ended September 30,
2000.

     Shareholder's  Equity  Shareholder's  equity  decreased to $85.9 million at
September 30, 2000 from $136.0  million at December 31, 1999.  This decrease was
primarily the result of a $75.0 million  increase in the net unrealized  loss on
investments  available-for-sale  from a $14.7  million  net  unrealized  loss on
investments  available-for-sale  at  December  31,  1999 to a $89.7  million net
unrealized  loss on investments  available-for-sale  at September 30, 2000. This
decrease was partially offset by a $25.3 million capital  contribution  from IHC
during the nine months ended September 30, 2000.
<TABLE>
<CAPTION>

                                                   RESULTS OF OPERATIONS
<S>                                                     <C>             <C>                <C>                     <C>

---------------------------------------------------------------------------------------------------------------------------
                                                         Three Months Ended                     Nine Months Ended
                                                           September 30,                          September 30,
                                                 -----------------------------------    -----------------------------------
                                                                                        -----------------------------------
(amounts in thousands)                                2000               1999                2000               1999
---------------------------------------------------------------------------------------------------------------------------
                                                                                    ---------------------------------------

Interest income                                    $     49,254       $     51,225        $    154,013       $    155,501
Interest expense on collateralized bonds                 43,419             42,232             134,379            129,812
Provision for losses                                      5,032              3,138              15,812              7,704
Net interest margin                                         390              5,265               2,605             16,472
Loss on termination of interest rate caps                     -                  -              (2,440)                 -
Gain on sale of investments                                   -                  -                   -                397
Extraordinary gain - extinguishment of debt                   -                  -                   -             27,842
Net income (loss)                                           390              4,634                (400)            43,745
</TABLE>

--------------------------------------------------------------------------------

     Interest  income  on the  collateral  for  collateralized  bonds  decreased
slightly to $49.3 million and $154.0 million for the three and nine months ended
September 30, 2000, respectively,  from $51.2 million and $155.5 million for the
same periods in 1999.  These decreases were primarily  related to the decline in
average collateral for collateralized bonds, which was offset partially by lower
premium  amortization  caused  by lower  prepayments  during  the three and nine
months ended September 30, 2000 than during the same periods in 1999.

     Interest  expense on  collateralized  bonds increased to $134.4 million for
the nine months ended September 30, 2000 from $129.8 million for the nine months
ended September 30, 1999. Interest expense on collateralized  bonds increased to
$43.4  million for the three months ended  September 30, 2000 from $42.2 million
for the same period in 1999.  These increases were primarily due to the increase
in one-month London InterBank  Offered Rate during the first half of 2000, which
was  partially  offset by the  decline  in average  collateralized  bonds due to
prepayments on the related collateral for collateralized bonds.

     Provision  for losses  increased to $5.0 million and $15.8  million for the
three and nine months ended September 30, 2000, respectively,  from $3.1 million
and $7.7  million  for the three  and nine  months  ended  September  30,  1999,
respectively.  These increases were primarily a result of increasing the reserve
for  probable   losses  on  various  loan  pools  pledged  as   collateral   for
collateralized bonds where the Company has retained credit risk.

     Net interest  margin for the three and nine months ended September 30, 2000
decreased to $0.4 million and $2.6 million, respectively,  from $5.3 million and
$16.5  million  for  the  three  and  nine  months  ended  September  30,  1999,
respectively. These decreases were primarily the result of additional provisions
for  losses and an  increase  in  interest  expense,  partially  offset by lower
premium  amortization  caused  by lower  prepayments  during  the three and nine
months ended September 30, 2000 than during the same periods in 1999.

     Loss on  termination  of interest rate caps of $2.4 million during the nine
months  ended  September  30,  2000  is the  result  of the  liquidation  of the
Company's  interest rate cap  agreements,  which had a notional  balance of $351
million, in order to enhance Dynex's liquidity position.

     Gain on sale of  investments  of $0.4 million  during the nine months ended
September 30, 1999 is the result of the recognition of the remaining gain on the
sale of the Merit 11B A-1 class, which had a principal balance of $4.9 million.

     The Company also incurred an extraordinary gain of $27.8 million related to
the recognition of unamortized premiums net of unamortized issuance costs on six
series of  collateralized  bonds,  which were  collapsed  during the nine months
ended September 30, 1999. The collateral securing these collateralized bonds was
re-securitized in the Company's $1.4 billion securitization in March 1999.

     Credit Exposures With collateralized  bond structures,  the Company retains
credit  risk  relative  to  the  amount  of  overcollateralization  required  in
conjunction  with the bond insurance.  Losses are generally first applied to the
overcollateralized amount, with any losses in excess of that amount borne by the
bond insurer or the holders of the collateralized bonds. The Company only incurs
credit  losses to the extent  that  losses  are  incurred  in the  repossession,
foreclosure and sale of the underlying  collateral.  Such losses generally equal
the  principal  amount  outstanding,  less any proceeds  from mortgage or hazard
insurance,  less the  liquidation  value of the  collateral.  To compensate  the
Company for retaining  this loss  exposure,  the Company  generally  receives an
excess  yield on the  collateralized  securities  relative  to the  yield on the
collateralized bonds. At September 30, 2000, the Company retained $186.6 million
in  aggregate  principal  amount  of  overcollateralization  compared  to $187.1
million at December  31,  1999.  The  Company had  reserves,  or  otherwise  had
provided coverage through third-party  reimbursement guarantees on $57.1 million
and $56.9 million of this  potential  credit loss exposure at September 30, 2000
and  December  31, 1999,  respectively.  At September  30, 2000 and December 31,
1999, $29.6 million and $30.3 million,  respectively,  of this reserve amount is
in the form of a loss  reimbursement  guarantee  from a  third-party  rated A by
Standards & Poors Ratings Services, Inc.

     Other  Matters At  September  30,  2000,  the  Company  had  securities  of
approximately  $308.6  million  remaining  for  issuance  under  a  registration
statement  filed with the Securities and Exchange  Commission.  The Company does
not anticipate issuing additional Bonds in the near future.


Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Market risk generally  represents the risk of loss that may result from the
potential  change in the value of a financial  instrument due to fluctuations in
interest and foreign exchange rates and in equity and commodity  prices.  Market
risk is inherent to both derivative and  non-derivative  financial  instruments,
and  accordingly,  the scope of the  Company's  market risk  management  extends
beyond derivatives to include all market risk sensitive  financial  instruments.
As a financial  services  company,  net interest  income  comprises  the primary
component of the Company's earnings. As a result, the Company is subject to risk
resulting  from  interest  rate  fluctuations  to the extent that there is a gap
between the amount of the  Company's  interest-earning  assets and the amount of
interest-bearing   liabilities  that  are  prepaid,  mature  or  reprice  within
specified periods.

     Dynex, as the Company's  parent,  continuously  monitors the aggregate cash
flow,  projected net yield and market value of the collateral for collateralized
bonds under various interest rate and prepayment assumptions.

     Dynex  utilizes  a monthly  static  cash flow and  yield  projection  under
interest rate scenarios detailed below. While Dynex may use this tool, there can
be no assurance Dynex will  accomplish the goal of adequately  managing the risk
profile of the investment portfolio.

     Dynex  measures the  sensitivity  of its net interest  income to changes in
interest  rates.  Changes  in  interest  rates  are  defined  as  instantaneous,
parallel,  and sustained  interest rate movements in 100 basis point increments.
Dynex  estimates  its  interest  income for the next twelve  months  assuming no
changes in interest  rates from those at period end. Once the base case has been
estimated,  cash  flows are  projected  for each of the  defined  interest  rate
scenarios.  Those  scenario  results are then compared  against the base case to
determine the estimated change to net interest income.

     The  following   table   summarizes  the  Company's  net  interest   margin
sensitivity  analysis  as  of  September  30,  2000.  This  analysis  represents
management's  estimate of the percentage  change in net interest  margin given a
parallel shift in interest  rates.  The "Base" case represents the interest rate
environment  as it existed as of  September  30,  2000.  The analysis is heavily
dependent  upon the  assumptions  used in the  model.  The  effect of changes in
future  interest  rates on the mix of assets and  liabilities  may cause  actual
results to differ from the  modeled  results.  In  addition,  certain  financial
instruments  provide a degree of "optionality."  The model considers the effects
of these  embedded  options when  projecting  cash flows and earnings.  The most
significant option affecting the Company's portfolio is the borrowers' option to
prepay  the  loans.  The model uses a dynamic  prepayment  model that  applies a
Constant  Prepayment  Rate  ranging  from 5.5% to 70.1%  based on the  projected
incentive to refinance  for each loan type in any given  period.  While  Dynex's
model considers these factors, the extent to which borrowers utilize the ability
to exercise their option may cause actual results to  significantly  differ from
the  analysis.  Furthermore,  its  projected  results  assume  no  additions  or
subtractions  to the  Company's  portfolio,  and  no  change  to  the  Company's
liability structure.  Historically,  the Company has made significant changes to
its assets and liabilities, and may do so in the future.

          ------------------------ ----------------------
                Basis Point           % Change in Net
          Increase (Decrease) in   Interest Margin from
              Interest Rates             Base Case
          ------------------------ ----------------------

                   +200                     (6.02)%
                   +100                     (3.02)%
                   Base                    -
                   -100                      3.02%
                   -200                      6.03%
          ------------------------ ------------------ ---

     Approximately  $1.3 billion of the Company's  collateral for collateralized
bonds as of September  30, 2000 is comprised  of loans or  securities  that have
coupon  rates which adjust over time  (subject to certain  periodic and lifetime
limitations)  in  conjunction   with  changes  in  short-term   interest  rates.
Approximately  64% and 27% of the ARM loans underlying the Company's  collateral
for  collateralized  bonds  are  indexed  to and reset  based  upon the level of
six-month LIBOR and one-year CMT, respectively.

     Generally,  during  a period  of  rising  short-term  interest  rates,  the
Company's net interest spread earned on its collateralized  bonds will decrease.
The  decrease of the net interest  spread  results from (i) the lag in resets of
the ARM loans underlying the collateral for collateralized bonds relative to the
rate  resets on the  collateralized  bonds and (ii) rate resets on the ARM loans
which are generally limited to 1% every six months or 2% every twelve months and
subject  to  lifetime  caps,  while  the  associated  borrowings  have  no  such
limitation.  As short-term interest rates stabilize and the ARM loans reset, the
net interest margin may be restored to its former level as the yields on the ARM
loans adjust to market conditions.  Conversely, net interest margin may increase
following a fall in short-term interest rates. This increase may be temporary as
the  yields on the ARM loans  adjust to the new  market  conditions  after a lag
period. In each case, however, the Company expects that the increase or decrease
in the net interest spread due to changes in the short-term interest rates to be
temporary.  The net  interest  spread may also be  increased or decreased by the
proceeds or costs of interest rate swap and cap agreements.

     As part of its asset/liability  management  process,  the Company may enter
into interest rate cap and swap  agreements.  These interest rate agreements are
used by the Company to help  mitigate  the risk  related to the  collateral  for
collateralized  bonds for  fluctuations in interest rates that would  ultimately
impact net interest income. To help protect the Company's net interest income in
a rising interest rate environment, the Company had purchased interest rate caps
with a notional amount of $351 million, which help reduce the Company's exposure
to interest rate risk rising above the lifetime  interest rate caps on ARM loans
underlying  the collateral for  collateralized  bonds.  These interest rate caps
provide the Company with  additional cash flow should the related index increase
above the contracted rates. The contracted rates on these interest rate caps are
based  on  one-month  LIBOR,  six-month  LIBOR  or  one-year  CMT.  The  Company
liquidated  the interest rate caps during the second quarter of 2000 in order to
generate liquidity for Dynex.

     The remaining portion of the Company's  collateral for collateralized bonds
as of September 30, 2000, approximately $1.1 billion, is comprised of loans that
have  coupon  rates  that are  either  fixed or do not reset  within the next 15
months.  The  Company  has  generally  limited  its  interest  rate risk on such
collateral  primarily through the issuance of fixed-rate  collateralized  bonds.
Overall,  the Company's  interest rate risk is primarily  related to the rate of
change in short-term interest rates, not the level of short-term interest rates.



PART II.          OTHER INFORMATION

Item 1.           Legal Proceedings:

                  None

Item 5.           Other Information:

                  None

Item 6.           Exhibits and Reports on Form 8-K:

(a)               Exhibits


     3.1 Articles of  Incorporation  of the Registrant  (Incorporated  herein by
reference to the Exhibits to Registrant's Registration Statement No. 33-83524 on
Form S-3 filed August 31, 1994).

     3.2  Bylaws of the  Registrant  (Incorporated  herein by  reference  to the
Exhibits to Registrant's  Registration  Statement No. 33-83524 on Form S-3 filed
August 31, 1994).

     3.3  Amended and  Restated  Articles of  Incorporation  of the  Registrant,
effective  April 19, 1995  (Incorporated  herein by  reference to Exhibit to the
Registrant's Current Report on Form 8-K, filed April 21, 1995).

     4.1 Indenture  between  Registrant and Trustee,  dated as of August 1, 1994
(Incorporated  herein by reference to the Exhibits to Registrant's  Registration
Statement No. 33-83524 on Form S-3 filed August 31, 1994).

     4.2  Form  of  Supplement   Indenture   between   Registrant   and  Trustee
(Incorporated  herein by reference to the Exhibits to Registrant's  Registration
Statement No. 33-83524 on Form S-3 filed August 31, 1994).

     4.3 Copy of the Indenture, dated as of November 1, 1994, by and between the
Registrant   and  Texas   Commerce   Bank  National   Association,   as  Trustee
(Incorporated  herein by reference to Exhibit to the Registrant's Current Report
on Form 8-K, filed December 19, 1994).

     4.4 Copy of the Series 4 Indenture Supplement, dated as of June 1, 1995, by
and between the  Registrant  and Texas  Commerce Bank National  Association,  as
Trustee (including schedules and exhibits)  (Incorporated herein by reference to
Exhibit to the Registrant's Current Report on Form 8-K, filed July 10, 1995).

     4.5 Copy of the Series 10  Indenture  Supplement,  dated as of  December 1,
1997,  by  and  between  the   Registrant   and  Texas  Commerce  Bank  National
Association,  as Trustee (related  schedules and exhibits available upon request
of the Trustee).  (Incorporated  herein by reference to Exhibit of  Registrant's
Current Report on Form 8-K, filed January 6, 1998).

     4.6 Copy of the Series 11 Indenture Supplement,  dated as of March 1, 1998,
by and between the Registrant and Texas Commerce Bank National  Association,  as
Trustee (related  schedules and exhibits available upon request of the Trustee).
(Incorporated  herein by reference to Exhibit of Registrant's  Current Report on
Form 8-K, filed June 12, 1998).

     4.7 Copy of the Series 12 Indenture Supplement,  dated as of March 1, 1999,
by and between the Registrant and Texas Commerce Bank National  Association,  as
Trustee (related  schedules and exhibits available upon request of the Trustee).
(Incorporated  herein by reference to Exhibit of Registrant's  Current Report on
Form 8-K, filed April 12, 1999).

     4.8 Copy of the Series 13 Indenture Supplement, dated as of August 1, 1999,
by and between the Registrant and Texas Commerce Bank National  Association,  as
Trustee (related  schedules and exhibits available upon request of the Trustee).
(Incorporated  herein by reference to Exhibit of Registrant's  Current Report on
Form 8-K, filed September 13, 1999).

     99.1 Standard  Provisions to Servicing  Agreement  (Incorporated  herein by
reference to the Exhibits to Registrant's Registration Statement No. 33-83524 on
Form S-3 filed August 31, 1994).

     99.2 Form of Servicing Agreement  (Incorporated  herein by reference to the
Exhibits to Registrant's  Registration  Statement No. 33-83524 on Form S-3 filed
August 31, 1994).

     99.3 Standard Terms to Master Servicing Agreement  (Incorporated  herein by
reference to the Exhibits to Registrant's Registration Statement No. 33-83524 on
Form S-3 filed August 31, 1994).

     99.4 Form of Master Servicing Agreement  (Incorporated  herein by reference
to the Exhibits to Registrant's  Registration Statement No. 33-83524 on Form S-3
filed August 31, 1994).

     99.5 Form of  Prospectus  Supplement  of Bonds  secured by  adjustable-rate
mortgage  loans  (Incorporated  herein by reference to Exhibits to  Registrant's
Pre-Effective Amendment No. 4 to Registration Statement No. 33-83524 on Form S-3
filed December 5, 1994).

     99.6 Form of Financial  Guaranty Assurance Policy  (Incorporated  herein by
reference to the Exhibits to Registrant's Registration Statement No. 33-83524 on
Form S-3 filed August 31, 1994).

     99.7 Form of GEMICO Mortgage Pool Insurance Policy  (Incorporated herein by
reference to the Exhibits to Registrant's Registration Statement No. 33-83524 on
Form S-3 filed August 31, 1994).

     99.8 Form of PMI Mortgage Insurance Co. Pool Insurance Policy (Incorporated
herein by reference to the Exhibits to Registrant's  Registration  Statement No.
33-83524 on Form S-3 filed August 31, 1994).

     99.9 Form of Prospectus  Supplement of Bonds secured by fixed-rate mortgage
loans   (Incorporated   herein  by   reference   to  Exhibits  to   Registrant's
Pre-Effective Amendment No. 4 to Registration Statement No. 33-83524 on Form S-3
filed December 5, 1994).

     99.10 Copy of the Saxon Mortgage  Funding  Corporation  Servicing Guide for
Credit  Sensitive  Loans,  February  1,  1995  Edition  (Incorporated  herein by
reference to Exhibit to the Registrant's Current Report on Form 8-K, filed March
8, 1995).

     99.11 Copy of Financial  Guaranty  Insurance  Policy No.  50364-N issued by
Financial  Guaranty  Assurance  Inc.,  dated April 7, 1995,  with respect to the
Series 3 Bonds (Incorporated  herein by reference to Exhibit to the Registrant's
Current Report on Form 8-K, filed April 21, 1995).

     99.12 Copy of Financial  Guaranty  Insurance  Policy No.  50382-N issued by
Financial  Guaranty  Assurance  Inc.,  dated June 29, 1995,  with respect to the
Series 4 Bonds (Incorporated  herein by reference to Exhibit to the Registrant's
Current Report on Form 8-K, filed July 10, 1995).

     99.13 Copy of the Standard  Terms to Master  Servicing  Agreement,  June 1,
1995 Edition  (Incorporated  herein by reference to Exhibit to the  Registrant's
Current Report on Form 8-K, filed July 10, 1995).

     99.14 Copy of Financial  Guaranty Insurance Policy No. 19804 issued by MBIA
Insurance  Corporation  (Incorporated  herein by  reference  to  Exhibit  to the
Registrant's Current Report on Form 8-K, filed November 15, 1995).

     99.15 Copy of Financial  Guaranty Insurance Policy No. 20596 issued by MBIA
Insurance  Corporation  (Incorporated  herein by  reference  to  Exhibit  to the
Registrant's Current Report on Form 8-K, filed March 21, 1996).

     99.16 Copy of Financial  Guaranty Insurance Policy No. 21296 issued by MBIA
Insurance  Corporation  (Incorporated  herein by  reference  to  Exhibit  to the
Registrant's Current Report on Form 8-K, filed June 19, 1996).

(b)      Reports on Form 8-K

         None.












                                      SIGNATURES



     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                         MERIT SECURITIES CORPORATION


                         By:  /s/ Thomas H. Potts
                              Thomas H. Potts
                              President
                              (Principal Executive Officer)





                              /s/ Stephen J. Benedetti
                              Stephen J. Benedetti
                              Treasurer
                              (Principal Financial & Accounting Officer)



Dated:  November 14, 2000