I have a pretty "good kid" kind of son who was 14 this past summer. He had a lovely girlfriend who we've known since they were in kindergarten together. We have a very small house with no rec room. She was over for a visit and I had talked to her mom about the logistics, and she said they had hung out at her house together in her bedroom as long as the door was open, no problem. I told my son, who promised nothing more than hand-holding, that I would agree under 2 conditions--door open, and to expect that I'd come to visit a whole lot and to know he'd never hear me coming. He said of course, no problem. Well, twelve minutes after they went up, it got quiet, so I went up to check. They both had their shirts off and were lying on the bed making out. That image will be burned into my noggin until the end of my days, let me tell you. It's not that they are bad or perverted--they are normal teenagers who are marinating in hormones 24/7.
I agree with the replies to let them do a later-than-usual night as a compromise, then you drive her home. Trust isn't the issue: biology is. But, perhaps you want to reinforce with him that it is the situation you don't trust, not him. A possible analogy that'd he'd understand might be: I trust you not to drink, but I wouldn't leave you alone with a six pack of beer (or whatever similar analogy works in your situation). And I agree that it doesn't matter who gave birth to this child--you are POA & in loco parentis and you are, for all purposes, his loving, caring parents. One yucky thing I have had to learn lately is that the incredibly sweet relationship I've had with my older son has had to change in some ways as he's aged (he's 15 now). Despite what they say, kids do want limits. This child sounds pretty fortunate that you are in his life--congratulations and keep up the good (hard) work.
Also, as a side note--I am a middle school teacher (home with a baby this year), and I have caught kids having sex in the bathroom. It can happen in about a split second. They are like jackrabbits.