I'm assuming your vet has already done the necessary blood and or skin tests. I would think it is some form of hormonal endoctrine disorder (hypothyroidism, cushings (usually diagnosed in senior dogs), addisons, etc.), but all of these should show chemical imbalances with a routine blood test and then you go on to test specifically for the disease it indicates.
There is another disorder in Yorkies that it sounds like and effects young puppies and would also explain the pigment change CDA - color dilution alopecia -
http://www.rievaulx.org/health_prob.html
You don't say how old he is - My vet was able to feel the testes at the 12 week appointment.
Please keep us posted on the information you find out. thanks