By Sofia Menchu

SANTA CATARINA PINULA, Guatemala (Reuters) -- The collapse of a hillside onto a town on the edge of Guatemala City killed at least 26 people and left hundreds missing on Friday, as rescue crews desperately searched for survivors in homes buried by dirt and sludge.

Loosened by heavy rains, tons of dirt and trees tumbled onto Santa Catarina Pinula in a valley on the southeastern flank of the capital late on Thursday, flattening dozens of flimsy houses when many residents had gone home for the night.

An aerial video broadcast in Guatemalan media showed the tree-lined hillside laid bare above a huge mound of earth, foliage and debris that completely covered part of the town, which hugs the side of a river in a deep ravine.

Scores of rescue workers labored through dusk to recover bodies from the tangle of mangled walls, beds and furniture churned up in the landslide. A Reuters photo showed the face of one person who had apparently been buried alive.

Alejandro Maldonado, head of Guatemalan disaster agency CONRED, told a news conference earlier on Friday that as many as 600 could still be missing after the disaster, which he said hit 125 homes.

Later, Julio Sanchez, a spokesman for fire services said 26 bodies had been recovered so far at the scene.

"I feel like I've lost my loved ones because all my neighbors died," said survivor Melina Hidalgo, 35.

She was washing clothes when there was a loud crash and the lights went out. She found neighboring houses covered in soil and mud. Felled electricity poles were giving off sparks and crying people searched for children, Hidalgo added.

Guatemalan media reported rescuers heard voices under collapsed buildings and earth as they struggled to dig people out.

The landslide was one of the worst in recent memory in the impoverished Central American country. Last month, the country was shocked by the arrest of its president on corruption charges.

Marta Guitz, 37, returned from work to find her house buried and was unable to reach Dany, her 17-year-old son, who she believed was inside.

"My husband is there now shoveling through soil to find our son," the domestic worker said as tears welled.

Oscar Raul de Leon and his family abandoned their home and he looked for his cousin, but all he found were the remains of the relative's home.

Earlier, authorities said at least 25 people were injured.

The government said 600 people were helping sift the rubble to pull out survivors while authorities set up a shelter to help people made homeless.

(Additional reporting by Enrique Pretel and Alexandra Alper; Writing by Dave Graham; Editing by James Dalgleish and Ken Wills)