Guys,
I have done more research and it looks like it could be two possible causes for this problem:
1. the chain jumped a tooth
2. the VANOS solenoid is not working

Now, for cause 1 I have to take the entire front down and do the timing. So, for this procedure I have to find a honest mechanic.
For option 2 I guess the front does not have to come off but how do I test to make sure the solenoid is actually not working. Not sure if I am right though but that's based on the reading I have done so far.
here is the pdf I was reading:
http://www.bmwclub.lv/files/Tab_4_M62_Engine_X5.pdf